AXIS Capital(AXS)2024-02-01 19:25Financial Data and Key Metrics Changes - In 2023, AXIS Capital generated operating income of $486 million, with a return on average common equity of 7.9% and an operating return on equity of 11%. Excluding reserve strengthening, these figures were 15.4% and 18.5% respectively [6][14] - The company achieved record premium production of $8.4 billion and net investment income of $612 million, with a 15% year-over-year growth in diluted book value per share [6][14] - The current accident year combined ratio improved to 91.8%, a more than four-point year-over-year improvement [6] Business Line Data and Key Metrics Changes - The insurance business generated gross premiums written of $6.1 billion for the year, a 10% increase compared to the prior year, with a combined ratio of 92.5% [16][18] - The reinsurance segment saw a combined ratio of 107.6% for the year, which includes 14.6 points of net reserves strengthening [21] - The insurance accident year loss ratio was 52% for the quarter, consistent with previous quarters, while the reinsurance current accident year loss ratio ex-cat weather was 64.5% [19][21] Market Data and Key Metrics Changes - AXIS is a leading player in the US wholesale marketplace, achieving five consecutive years of double-digit growth, with a 76 accident year combined ratio in 2023 [8] - The company is recognized as a global leader in renewable energy, with a focus on profitable growth in this sector [8] - The reinsurance portfolio has transitioned to a more consistent and profitable book value, with favorable pricing above trend in most lines of business [20][21] Company Strategy and Development Direction - AXIS aims to elevate itself as a specialty underwriting leader, focusing on targeted underwriting strategies and a diversified portfolio [5][6] - The company is investing in best-in-class capabilities in underwriting, claims, and operations, with a focus on digital and automation improvements [10][11] - AXIS expects to deliver a consistent low 90s combined ratio and expense ratio in the low 30s, with double-digit ROE and book value per share growth [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence entering 2024, citing favorable market conditions and ongoing investments in people and operating capabilities [12][24] - The company anticipates continued growth in insurance and a strong capital position to support both growth and share repurchases [42][43] - Management highlighted the importance of maintaining a disciplined approach to underwriting and capital allocation in a competitive environment [7][12] Other Important Information - AXIS returned $38 million to shareholders through common dividends in 2023, with a total year-to-date capital return of approximately $153 million [24] - The company is evaluating the implications of Bermuda's Income Tax Act and expects to provide updates in the coming months [25] Q&A Session Summary Question: What kind of inflation assumptions were changed regarding reserve charges? - Management adjusted all inflation assumptions, moving trends to high single digits, encompassing social inflation and severity trends [28] Question: Where do you stand in terms of COVID-related reserves? - Some reserves remain for COVID claims, particularly in the reinsurance segment, while insurance reserves are mostly paid out [32] Question: Can you clarify the insurance loss ratio and any one-off items? - The underlying loss ratio was consistent, with no significant one-off items affecting the quarter [36] Question: What is the prioritization of capital towards buybacks versus organic growth? - The primary focus is on profitable growth, but the company also sees value in repurchasing shares at current prices [42][43] Question: Will the reserve charge impact the ceded reinsurance program in 2024? - While modest changes are expected, the reshaped portfolio should not lead to material impacts [45] Question: What is the outlook for total G&A expenses in 2024? - G&A expenses are expected to decrease as the company continues to improve efficiency [46] Question: How did timing affect reinsurance premiums? - Adjustments and renewals that moved out of the quarter contributed to lower premiums, with a normalized growth rate of just over 5% [49][50]