AXIS Capital(AXS) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved an annualized operating return on equity of 19% in the quarter [5] - Record diluted book value per common share reached $70.34, an increase of 18.6% year over year [6] - Operating earnings per share hit an all-time high of $3.29, a 12% increase over the prior year quarter [6] - Generated record second quarter premiums of $2.5 billion, including $732 million in new business [6] - Combined ratio improved to 88.9%, with catastrophe events approximating an industry loss of $25 billion [6][20] Business Line Data and Key Metrics Changes - The Insurance segment reported gross premiums written of $1.9 billion, a record and a 7% increase compared to the prior year quarter [22] - Current accident year ex-cat combined ratio for Insurance was 83.2%, with an overall combined ratio of 85.3% [7][25] - Net written premium in Insurance grew 8.1% in the quarter, with underwriting income reaching $152 million, the highest on record [8] - In Reinsurance, gross premiums decreased by 6.8%, but the combined ratio remained stable at 92% [26] Market Data and Key Metrics Changes - In North America, premiums increased by 8% over the prior year quarter, with submission flow up more than 22% [8] - Casualty rates increased by 12% in the quarter, while U.S. Primary casualty rates rose by 12.5% [10][11] - Property segment experienced flat to low single-digit growth with an overall rate reduction of 11% [11] - The company observed competitive market conditions, particularly in property, while maintaining premium adequacy across its portfolio [9] Company Strategy and Development Direction - The company continues to focus on selective growth in competitive markets, particularly in casualty and professional lines [9][12] - Investments in technology and AI are being made to modernize underwriting platforms and improve operational efficiency [16][32] - The company aims to leverage its specialty capabilities to navigate a dynamic risk environment and achieve profitable growth [17] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing uncertainty due to trade disruptions, tariffs, and geopolitical tensions, which could impact inflation and growth [7] - The company remains optimistic about achieving profitable growth, with expectations for the second half of the year to exceed the 6% growth seen in the first half [94][96] - Management emphasized a disciplined approach to underwriting and reserving, particularly in light of evolving market conditions [38][41] Other Important Information - The company recorded a release of $20 million from short-tailed lines, with $15 million in insurance and $5 million in reinsurance [21] - The effective tax rate for the quarter was 20.1%, reflecting the geographic mix of profits [30] - The company returned substantial capital to shareholders, completing $50 million in share repurchases and declaring $35 million in common dividends [31] Q&A Session Summary Question: Thoughts on reinsurance sessions in the future - Management indicated that the reinsurance purchase strategy will remain agile and flexible, adapting to risk views and capital positions [34][35] Question: Concerns about the accident year loss ratio - Management expressed confidence in maintaining the loss ratio around 68% for the remainder of the year, emphasizing a cautious approach to reserving [37][41] Question: Pricing adequacy in insurance and reinsurance - Management noted that pricing in liability casualty is ahead of loss costs, while property pricing has seen deterioration [44][45] Question: Changes in MGA strategy - The company has adopted a selective and disciplined approach to MGAs, focusing on bottom-line results rather than volume [57][59] Question: Cedents enhancing underwriting and claims processes - Management observed that many companies are strengthening their claims processes, but emphasized the need for statistically repeatable evidence before increasing reinsurance liability growth [60][61] Question: Share buyback strategy - Management stated that share buybacks are opportunistic and will continue as deemed appropriate, with $110 million remaining on the repurchase authorization [81][84] Question: Growth in lower middle market business - The lower middle market business grew by $64 million in the quarter, with continued investment in underwriting modernization [87][89] Question: Impact of UK Russia aviation ruling - Management confirmed no adverse impact from the ruling, as the company does not operate in the contingent war market [105]