Axis Capital Holdings Limited Stock

Good day, and welcome to the Second Quarter AXIS Capital Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Cliff Gallant, Head of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to our second quarter 2026 conference call. Our earnings press release and financial supplement were issued last night. If you would like copies, please visit the Investor Information section of our website at axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast on our website.

Joining me on today's call are Vince Tizzio, our President and CEO; and Matt Kirk, our CFO. 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 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 the 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, our 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.

Thank you, Cliff. Good morning, and thank you for joining our call. Before sharing my prepared remarks, I want to first acknowledge the incredible efforts expended by my colleagues around the world in delivering strong first half results that are aligned to our strategic focus and ambition. This was a solid quarter where AXIS continued its track record of delivering consistent profitable growth, and our results included 14.3% annualized operating return on equity, a 15% year-over-year growth in diluted book value per share, our 15th consecutive quarter in doing so.

Our performance was generated against the backdrop of a market impacted by several trends. As has been widely reported in the industry, market conditions are softening, and we are observing increasing competition and pricing pressure more broadly across the micro markets I've described in past calls.

However, terms and conditions and limits have remained largely intact and AXIS continues to lean into attractive specialty markets where we see premium adequacy and risk-adjusted returns that meet our standards. Second, the Iran conflict has generated year-to-date industry losses that is believed to be in the range of $2.5 billion to $3 billion.

In the quarter, AXIS reported $31 million in losses from this conflict, which is classified as a cat and driven primarily by coverages within our terrorism and marine war businesses. Both are specialist classes where AXIS participates as a lead market with a strong and long established reputation. Thus far, the business remains premium adequate, and I'll note that our underwriting controls are among the most conservative in the market and that our team is very closely monitoring the situation on the ground.

Lastly, this was a quarter with some $21 billion in industry catastrophe losses, which were lower year-over-year, but the composition continues to shift. $18 billion of the industry cat losses in the quarter came from severe convective storms. These perils are becoming more frequent, more geographically dispersed and more costly per event. And during the quarter, AXIS absorbed $49 million in losses from FES activity, which was well within our expectations.

Let's now unpack the quarter. AXIS generated a 93% combined ratio, 89% current accident year ex-cat combined ratio, 10.9% GA ratio, which is in line with our expectations. And we produced gross written premiums of $2.7 billion, up 6% over the prior year. Our growth was disciplined and targeted towards specialty short lines, predominantly within our insurance segment. In the quarter, short tail represented 57% of our premiums, including 59% in insurance and 51% in reinsurance.

Moreover, the growth was achieved even as we cycle managed within our reinsurance portfolio, reducing our premiums by 25% as we continue to practice vigilance in liability and professional. Our growth in the quarter was aligned with our strategic focus and supported by the investments that we've made in recent years to broaden our capabilities. Our expanded classes, which are largely in short-tail lines, continued to deliver profitable growth as we further expanded our share in markets where AXIS has historically been underrepresented.

Second, as discussed in previous calls, our AXIS Capacity Solutions capability is continuing to match our underwriting expertise and third-party capital appetite to meet our customers' needs. ACS is enabling greater gross lines on selected classes that are premium adequate while maintaining our net underwriting appetite. Fee income from ACS was close to $4 million in the quarter, and we expect this to grow to about $17 million for the full year.

Let's now move on to our segment results, and we'll begin with Insurance. It was a strong quarter for our Insurance business, highlighted by premium generation of $2.2 billion, which was up 15% over the prior year, underwriting income of $119 million, a 90% combined ratio and a current accident year ex-CAT combined ratio of 84.5%.

Unpacking our insurance results further, our core insurance portfolio generated about 2% of the growth in the quarter. ACS contributed about 8%, and we drove about 5% of our insurance growth from our expanded classes. Our progress within insurance is achieved as we further lean into our multivariate channels of distribution. Indeed, we've developed and introduced propositions that give us greater and more diversified access to targeted specialty lines in our key markets.

In North America, within the wholesale channel, our reputation and brand recognition and wallet share is substantial. And in the quarter, 68% of our North American insurance premiums came from wholesale. Submission flow remains healthy at 20%. We are pursuing a number of attractive opportunities within the North American retail segment that are not in conflict with our wholesale business and nearly 19% of our North American insurance premiums in the quarter came from retail, and we see continued upside potential.

Our delegated business was flat year-over-year, representing about 13% of premiums. And finally, in our London market business, we are a top syndicate with lead propositions in a number of lines and maintain a largely short-tail portfolio with highly specialized capabilities. Let's now step back and look more deeply at insurance market conditions and AXIS' posture.

In my outset comments, I noted the softening market conditions that we are observing are now broadly across most of the market. For AXIS, we are leaning into our diversification of product, customer segments and deep specialty expertise to drive disciplined and targeted growth while cycle managing where needed.

I'll now provide observations across several lines of business. Within property, in the quarter, gross premiums were up 21%, fueled in substantial part from our ACS capability. On a net basis, our book has shrunk by 15% in the quarter as we increased our reinsurance sessions on our property treaty. Within our property portfolio, rates were down 17% in the quarter.

As this market now transitions more rapidly into a softer environment requiring deepen cycle management, we take confidence in our starting point. We've built a portfolio with premium adequacy and an average net limit that remains in low single-digit millions that is well balanced in peril and geographic mix and also backed by a cat XOL protection that attaches at $100 million per event.

In liability, we grew 8% in the quarter, primarily through rate increases of 7%. Our premium dispersion was spread across U.S. Excess Casualty, a substantial business. It shrunk 4% and delivered rate change of 8%. This book remains premium adequate. Our dedicated U.S. excess casualty lower middle market unit delivered 22% growth and is also premium adequate.

In our previously announced RAC Re transaction, liability lines contributed $21 million and delivered a rate change of 10%. I'll note that our primary casualty business, an area where we've maintained a cautious stance, has shrunk by 8% on a year-to-date basis and has yielded a 9% rate increase. In Professional, growth in the quarter was 16% with a rate increase of 2%. A key driver was E&O, where we continue to lean into our expanded classes, including Allied Health and Design Pro to name 2.

Our growth in Professional was also supported through the RAC Re partnership. Within cyber, in the quarter, we reduced premiums by 5%. Rate reductions in cyber continued and were 7%, adding pressure to premium adequacy. At a group level, we've reduced our premiums by 30%. Let's now move to our Reinsurance segment.

In the quarter, we executed against the targeted specialist reinsurance strategy that we've been discussing with you over the last several years. In the second quarter, AXIS Re generated its 10th consecutive quarter of profitability. We produced $440 million in premiums and more than half, 51% of our production came from specialty short-tail lines. We generated $90 million in new business with 94% coming from short-tail lines, and we produced a 94.5% combined ratio.

We're enjoying excellent premium adequacy across all of our specialty lines with the exception of our A&H employer stop-loss business, where we are seeing continued pressure and competition. This quarter, approximately 22% of our reinsurance premiums for the year were up for renewal.

As noted earlier, we shrunk our reinsurance book by 25% in the quarter. Nearly all the reduction came from lines that we've previously pointed to as being cycle managed. Professional lines contributed 58% of the reduction in premiums and liability contributed 42%. Our reinsurance strategy and value proposition remains consistent.

As we look to the future, our focus continues to be on specialist classes, supported by highly selective and disciplined liability and professional appetites. Stepping back, across the company, we continue to add talent to complement our team and support our ambition. I'll share just 2 recent examples.

Tony Izzo joined AXIS as our Chief Commercial Officer and is helping us even further elevate an already strong global distribution platform. Within our operations team, we have added Rahil Jagani as our Head of AI and Technology Strategy, serving in a new leadership role that will be the bridge between strategy, business value and execution of AI and emerging technologies across our enterprise.

I'll add that for 3 years through our How We Work program, we have strengthened AXIS' operating foundation, simplifying processes, embedding agile ways of working and piloting AI across underwriting, claims and operations.

By creating the group COO role announced last quarter, we took a deliberate and strategic step to bringing together the functions that shape enterprise execution as an integrated team under a single leader. This is a structural response to how our industry and the risk environment within specialty is evolving, and it is enabling us to scale AI, protect underwriting discipline and translate transformation investments into measurable financial outcome.

In the third quarter, we will celebrate the 25th anniversary of AXIS. Our company was born in the aftermath of September 11, when our founders answered the call within the market for specialized products during a time of global uncertainty. Just as we did then, today, AXIS stands apart for its specialist capabilities, its talent and its expertise in helping our customers navigate a volatile world.

In the last several years, AXIS has made tremendous strides propelled by our discipline and consistency in execution, its straight spoken style of management, its strong caliber of talent, excellent customer service and our relentless focus on delivering value to our shareholders over time. We covet the trust that we've earned, and we will endeavor to further advance our strategy and realize our ambition of being the best specialist underwriter in the world.

In closing, this was a solid quarter for AXIS. We acknowledge the market has become softer, and we have a strong and resilient portfolio that is built for the market ahead. We continue to see attractive risk-adjusted return business to target and maintain within our portfolio. We also expect to continue to realize the benefits from the investments we're making in products, distribution, technology and talent.

Finally, our strategy is predicated on generating long-term value creation for our shareholders. With that, I'll now pass the floor to Matt for his comments.

Thank you, Vince, and good morning, everyone. I'm happy to have my first full quarter as AXIS CFO under my belt. AXIS is ambitious, and we have a lot of positive momentum today, and I see my role as making certain that AXIS remains on sound financial footing to have the flexibility to execute upon our operating goals.

The second quarter was strong. Our net income available to common shareholders was $251 million or $3.38 per diluted common share, resulting in an annualized ROE of 17%. Our operating income was $211 million or $2.84 per diluted common share, which resulted in an annualized operating ROE of 14%. Starting with our group underwriting highlights. Our gross written premiums of $2.7 billion were up 6% over the prior year quarter, driven by ongoing strength in insurance, partially offset by expected declines in reinsurance.

The combined ratio was 93.1%. Cat losses were $80 million, resulting in a cat loss ratio of 5.3%. These losses were primarily driven by severe convective storms in the U.S., which totaled $49 million, with the remainder related to the Middle East conflict. Both quarter and year-to-date weather-related cat losses are in line with our modeled expectations.

Losses from the Middle East conflict currently appear modestly below our market share. However, the situation remains highly fluid, and we are actively monitoring our exposures and importantly, we are standing by to support our clients. Over time, these lines have been highly profitable for AXIS. We are a leader in the market, often setting terms and conditions. And on occasion, we are one of the few markets available to our clients.

In many ways, these lines define the company as a true specialist. Turning to reserves. We remain confident in our company's overall position. In the quarter, we recorded a reserve release of $15 million with a $12 million in insurance and $3 million in reinsurance. Our releases continue to be from short-tail lines. Our acquisition expense ratio of 20.8% is up against 19.8% in the prior year quarter as we continue to emphasize growth in shorter tail lines, which carry higher commission costs.

In insurance, this largely relates to pet, surety and ACS-sourced businesses, while in specialty reinsurance, it would be credit. This trend will continue for the foreseeable future as we emphasize growth in shorter tail lines. Our fee income was $22 million, including both insurance-related and other income and offsets to G&A, stemming from our ILS investments and a growing contribution from ACS.

Our consolidated G&A ratio for the quarter, including corporate, was 10.9% versus 11.6% as dollar spend on G&A was essentially flat year-over-year. We're pleased to have achieved the target level we presented to you 2 years ago. For the full year, we are still targeting 11%, although as we have said previously, we will continue to make attractive investments in the best interest of shareholders when opportunities arise to hire new teams, invest in the business, reward high performers and build long-term shareholder value.

Moving to our segment results. Insurance had gross written premiums of $2.2 billion, up 15%. Our underlying insurance book grew at low single digits, while expanded products and initiatives accounted for growth in the mid-single-digit range and additional growth came from our ACS innovations, including the Ryan RAC Re deal. We've grown strongly as we've made the most of the current environment. And as Vince alluded to, in line where we're seeing particularly rapid rate declines, such as property, we're exercising increased prudence and selectivity.

Our insurance net written premium growth was 6%, below that of our gross premium growth, partially reflecting the normalization of 1Q's net faster than growth that I discussed on our Q1 call. In addition, at midyear renewals, we increased our sessions in property from 30% to 37%, while we maintained our $100 million cat XOL attachment. Our underlying insurance loss ratio was 54%, 1.7 points higher than the prior year quarter.

We previously indicated that we expected approximately 1 point of year-over-year deterioration driven by business mix changes and loss trend. During the quarter, we took measures to reflect evolving market conditions and maintain a high degree of confidence in our loss picks. Specifically, we are incorporating accelerating softening in property and recognizing a more competitive environment in the casualty lines.

We expect these pressures to be ongoing. We will continue to be transparent about what we are seeing across the market and the actions we are taking in response. Turning to reinsurance. In line with our forecast of double-digit declines for the full year, gross written premiums were down 25%, reflecting our decision to cycle manage our casualty lines. The reinsurance combined ratio was 94.5% for the quarter. The current accident year loss ratio was 68.3% versus 67.9% in the prior year quarter as we recognized increased competitive pressures in A&H employer stop-loss business.

In addition, we reported 0.8% this quarter for war-related cat losses. When we look at our business as a whole at the halfway point of the year, you can observe that we are managing through a changing marketplace. Company-wide gross premium growth is coming in at expectations, and we're bringing in new fee income associated with ACS. On a net premium basis, we are actively managing our writings and exposures, including increased property sessions at renewals and a continued pullback in casualty writings in our reinsurance book.

These actions, coupled with what we see as prudent action in our loss picks, shows our emphasis on continued protection of the balance sheet and shareholder returns. Turning to investments and capital. Investment income was $182 million, largely in line with $187 million in the year ago quarter. Net investment income from fixed maturities performed well, up 9% over the prior year quarter, driven by strong cash flow and a higher book yield, partially offset by capital return to investors through dividends and buybacks.

Returns from our alternative portfolio were modest but within our expected range. Overall, our investment portfolio remains well positioned, supported by growing fixed income base, attractive market yields, continued operating cash generation. Our effective tax rate in the quarter was 19.2%, and we would expect it to run in this range for the foreseeable future based upon our expectations of where we will report profits.

We remain in a very strong financial position, allowing us to return capital to our shareholders through dividends and share repurchases while prioritizing organic growth opportunities. During the quarter, we returned $122 million to our shareholders through dividends of $33 million and share repurchases of $89 million, up from $60 million in Q1.

At quarter's end, $263 million remained on our current authorization. We believe we are creating shareholder value, which is not fully recognized in our current valuation and thus, we expect to continue to be active in repurchases in the second half of the year.

With that, we'd be happy to answer your questions.

[Operator Instructions] The first question comes from Andrew Kligerman with TD Cowen.

Really looked like a solid quarter. I'm looking -- I want to zero in a little bit on the loss picks because in insurance, where you kind of were up about 2 points on the accident year loss ratio at 54%. Should I assume that the higher loss pick was all generated by property? Because when I -- Vince, when I look at the rates that you mentioned on the call, they seem like they're kind of in line with what Chubb was saying where general liability was up 6% to 7% and excess casualty loss costs were up 9.5% to 12%.

Are you kind of on the casualty side, seeing your rate up in line with the loss cost? Or are you a little behind there?

Andrew, thank you for your question. The rate -- excuse me, the loss ratio change that we actioned in the quarter is driven in large part by property, but also our continued cautiousness and stance within casualty lines. And just as you know, over the last several quarters, we've continued to rightsize that business. In this quarter, we produced a 7% rate change, which was behind trend.

And we've reflected the apportioning of where we were tolerating growth. You'll note from my opening remarks, we pointed to lower middle market and ACS, where we found acceptable pricing in terms and trend assumptions. But in the larger business of excess casualty, we shrunk that business. And equally, on the year-to-date basis, our primary casualty business has shrunk.

Maybe more broadly, the actions we took with respect to our attritional loss ratio change are really a combination of 2 substantial factors. You highlighted the line of business that's driving it. But let's not forget the mix component at AXIS. Now more than 50% of the mix is short tail. We're being responsive to the change in landscape around pricing, and we're observant to preserving and protecting our premium adequacy in order to sustain delivering ex-cat combined ratios of 84.5% in our insurance business.

And so we're going to remain highly agile, focused on the long term and be responsive to the trends that we're seeing and not merely observe them in written expression. We will action within our portfolio, changes in our underwriting appetite, course corrections in our loss ratio and build in sustainability and predictability in our results.

That makes a lot of sense, Vince. And it kind of carries through to reinsurance with gross written down 25%. And you mentioned that it was driven largely by the casualty nonrenewals. So I'm kind of curious, what are you seeing there on ceding commissions and rate -- reinsurance rate, that is not the underlying rate?

Yes. So the reinsurance strategy is being executed exactly as we had foretold in the fourth quarter. As you know, for the last several years, preceding Dan, who runs the segment today, Ann has articulated a cautious posture in respect to professional and liability. That was largely off of what we found to be an unfair trade on ceding commissions, cautiousness in our view of risk outlook on loss development costs, and we've maintained that cautious posture.

In this quarter, acutely, our growth was down 25%, and that was largely because of the composition of the North American portfolio, which had a large percentage of its professional and liability business expiring. And so we've maintained the discipline that we've been talking about, and we do expect to continue executing that strategy. And I think if you look at the 6-month mark of our results, I think you'll feel fairly comfortable that we're likely to end up around the range of where we are at the 6-month mark. Matt, would you like to come over the top there?

Yes, Vince, and Andrew, good talk to you again. Just the 25% feels like a big headline. And I just call everyone's attention that our Q1 decrease quarter-over-quarter was 2%. And so for the full year 6 months, we're down 10% year-to-date, and that's broadly where we think we're going to end the year. So I just wanted to give the context of what's happening quarter-over-quarter in both periods, Q1 and Q2.

And just point of clarity, rate is down a little bit on the reinsurance casualty line as well?

In the second quarter, we delivered 8.4% in liability, which is down from 11.9% in 2Q '25.

The next question comes from Yaron Kinar with Mizuho.

I guess my first one is going back to the 170 basis point increase in the loss ratio in insurance. By how much did you increase the casualty picks there? And are these higher picks a function of higher loss experience that you're seeing or really more a function of being more prudent and maybe building in a greater uncertainty reserve?

Yaron, it's Matt, and good to speak to you again. This is not from trend. Let me just be specific. We're talking about 1.7%. I want to go back. We signaled 1 point and change at year-end. In Q1, we said 1 point sounded about right, but we would come back to you if pricing changed beyond expectation. And that's exactly what we happened and seen in this quarter. In property, we're seeing pricing down 17%. That's beyond what we had anticipated, specifically E&S property down 22% in the quarter. That's really tilted us that we have to be more conservative with loss picks. So it's a combination of both property and casualty, and we remain cautious, and we wanted to show those results as we see them to the Street.

And do you have a number for the increased casualty loss pick?

Yes. We're not going to give guidance. I mean we're talking about splitting [ 0.7% ], but we are saying we are seeing rate increases on casualty not where we think they need to be, and we're taking appropriate caution.

Okay. And then is it fair -- just by looking at the growth or even the small reduction in exposure in casualty, is it fair to say that you still see the casualty book as not just rate adequate, but attractive enough because we are seeing a better growth profile there than we are in reinsurance where you're clearly cutting the casualty exposure by a much more significant amount?

Yaron, this is Vince. It will be very selective and very targeted in the growth of any of the casualty businesses that we are putting our pens down on. It is revealed in part in our outset remarks, uncharacteristically in our excess casualty business, which is a franchise valued business for our company, we did not grow the business. We saw rate pressure, and we responded. In contrast, our lower middle market businesses are broadly performing well. And so we don't cast a brush in casualty that suggests all are adverse or becoming increasingly competitive. We're being highly selective and highly disciplined, and that will be our course here on out.

The next question comes from Rowland Mayor with RBC Capital Markets.

I wanted to start on the competitive environment. A lot of that competition has been attributed to MGAs. And I was just wondering if you could curtail any relationships there and how you manage MGA relationships in a more challenging pricing environment.

Rowland, this is Vince. Well, listen, we've had a number of actions extended within our delegated business ranging back from 2023 in terms of who would be within our portfolio of delegated. Recall the proposition of why we use delegated is to access different distribution channels, capture specialized lines with talent behind it and operational efficiencies that are present. We have a highly disciplined approach to delegated. In the U.S., we reported flat growth year-over-year.

At the company level, our London market business is not outsized relative to the participants in the London market vis-a-vis delegated. We had a 5% increase in our delegated portfolio in 2Q over 2Q. That was largely driven by previously announced delegated partners in Pet and surety and yes, ACS, where we have continued strong confidence. And so we're going to continue to monitor these relationships. In the secondary part of your question, we have a lot of governance around it, involving claims, underwriting and actuarial. We have to maintain that vigilance, particularly as the pricing environment continues to worsen.

That's super helpful. And then I guess just turning to the Iran conflict losses. Are those stemming from policies written prior to the start of it? And should we see lower levels as time progresses even if it's a steady state?

We've been active in the conflict in support of war on land, so-called terrorism coverage and so-called marine war, covering vessels. And so we've actioned our policies, which, as we've described in the past with respect to marine on war. These are very short-term policies, highly specialized offerings. These losses and written premium are occurring real-time live, and we have been in support of many of our long-standing insurers, something that we're fairly proud of. We are providing coverage to insurers that, in many instances, are decade-old policyholders to our company in one form or another, and we're happy to support them while remembering that we've got to earn a fair return on the capital we deploy.

And if I could sneak just one more. Corporate expenses were up fairly significantly year-over-year. What's the driver of that?

Yes. I would look at just overall corporate expenses on a quarter-to-quarter basis are where we expect them to be. Gross expenses year-over-year are relatively flat. I wouldn't look into quarter-over-quarter on specifically corporate and just focus your attention on the overall expense base, which frankly, we're quite happy about. We're in the 10.9% range, 10.8% range last year. We're committed to the 11%. And that 11% is inclusive of the corporates overall.

The next question comes from Brian Meredith with UBS.

So Vince, I want to dial in on the MGA business a little bit. But actually, just first one quick question on the underlying loss ratio in insurance. Was any of that maybe kind of catch-up from hiring loss -- higher loss picks in the first quarter as well? Or is it simply just second quarter?

No, Brian, second quarter forward.

Okay. Perfect. On the MGA stuff, I guess just curious, are the loss picks of the results you're seeing on your MGA-produced business different or perhaps worse than maybe non-MGA produced business? Are you seeing more rate pressure there?

No, no. Remember, part of our assumption set as a result of the changes we took in our delegated business contemplate alignment on factors like pricing, loss picks, assumptions of trends, target customers, average limit grants. And so there's a careful eye. The direct answer to your question is no, not outsized. There are always puts and takes between and among portfolios, of course. But in the aggregate, the answer is no.

Great. And then one other just quick one here. If I think about RAC Re, I know when you put it all together, you provided some potential volume, which you could get from the program over the next several years. Given the competitive marketplace, one, are you evaluating the MGAs that you're actually going to participate in because I know you've got flexibility there. And two, do you think that potential volume that you thought you would get from the program could be lower?

Brian, thank you for recalling the terms associated with the RAC Re transaction and most particularly, the observation relating to our ability in year 2 to evaluate the continuance of the MGUs that we're supporting. And to your question, we are examining those that we will continue to participate in, course correct wherever we think is necessary. So I would intimate that volume may come down from that number. I'm not prepared to tell you what the deviation would be from the numbers that you have. but we will remain bottom line focused, and we are enjoying the structure of our contract with Ryan Specialty and a strong partnership generally there.

The next question comes from Charlie Lederer with BMO.

Just wanted to go back to Vince's comments in response to Andrew's question earlier on the impact of mix in the insurance loss picks. It felt like from your prepared remarks that professional lines and E&O is an area that's disproportionately growing on a net basis. It's hard for us to see because of the ACS impact. Is that fair? And should we expect professional lines to come in at a higher loss pick given you're shrinking in property and primary liability, if I understood you correctly.

Yes. I would just call out professional is higher in the first half of the year, and we will expect to see that to moderate in the back half of the year. And no, we're not indicating higher loss picks on the professional lines of business.

Okay. And then maybe just on the G&A ratio. You guys are showing that you're going to come in below the 11% that you guided to. I guess, how are you thinking about that ratio from here just with all the moving pieces?

Great. And yes, I mean, look, it's been a focal point for the past 2 years since we put that out there. I wouldn't get caught up on a 10.9% versus an 11% versus 11.1%. I think the key message here is we rightsized our expense base to our book. And so we're not going to give guidance on next year, but we're going to continue to moderate our expense base to mirror what our writings are. So we're comfortable with where we are right now. We're comfortable with our target of 11%. And if that changes in the future, we'll come back to you.

I would just add a couple of sentence there. As we entered in the first quarter, if we see an opportunity to extract the team, make investments that accelerate our journey of profitable growth, we will make those investments. We believe that we will achieve our commitment of 11%, but we also are going to remain highly active in the market. There's a number of talent dislocations arising, and our teams are talking to any number of people. So we're going to be balanced in the interest of our shareholders and think long term.

If I could just ask one more. Maybe just on the -- going back to the insurance reserves. Has there been any change to the IBNR ratios in that segment?

No, we haven't made any significant changes to our reserves. We're confident in our overall strength and adequacy of our overall reserve position.

Our next question comes from Hristian Getsov with Wells Fargo.

My first question is on the insurance accident year loss ratio. So going back to that, I guess if you kind of embed these higher picks, what are you assuming in terms of the second half or even into '27 in terms of pricing? Are you expecting property and casualty pricing to get worse from here to stay stable? Like how should we think about that?

Yes. And look, I would say what we've reported in our attritional loss ratio in the quarter is not a bad barometer of what we expect to see for the rest of the year. We're not going to give guidance in 2027. But as you've seen, when we see things changing and they are changing fast, we're going to react. But that's a good starting point to try to model out for the rest of your year.

Got it. And then my other question is on the reinsurance segment. I guess as you aggressively continue to pull back, particularly in liability and you've had some recent headcount cuts, like how do you kind of envision the business performing as you kind of cycle manage and how low of a mix of the total portfolio can we see that go? And then just sticking with that, like any challenges with employee retention, just given like the significant pullback in the business?

Well, firstly, we have an established range between our insurance revenue from reinsurance. We've been saying over the last several years, an apportionment of 75-25 would look approximate to what we would look like in the intermediate term. This quarter on a gross basis, 83%-16%. Year-to-date, we're in keeping with our historical range. In respect to the execution of the strategy, we acknowledge there can be people pressures.

But we're confident in our ability to retain the colleagues that we wish to retain, attract the colleagues with the value proposition that we have and continue to deliver on the commitments that we've made since 2023 with respect to the strategic purpose of this business, the financial contribution we expect from this business and the stability of the performance of this business.

And so we acknowledge that we're operating in a challenging environment there. We have a very particular view on long-tail lines. We're going to continue to execute against that. And with reference to the insurance business and just adding a couple of comments to your question.

The loss ratio that we adjusted, which is about [ 0.7% ] up from what we had referenced back in the fourth quarter with the available information we had at that time is, as Matt says, something that you should contemplate at the year-end being in this vicinity, but we're going to be responsive to the trends that we see in the market. And so I want to make certain that the full year view for you is at least modeled to where we are now, give or take, but that's where we'll be in both underwriting platforms from a loss ratio perspective.

The next question comes from Josh Shanker with Bank of America.

If we think back to a year like, let's say, late 2007, 2008, ultimately, pricing was headed down, margins were deteriorating. But the truth is, if you go back in time, you would have written as much business as you possibly could. It was great for a number of years more. The fact that not just you, but everyone is worried about markets right now, how do you know that you're not leaving great opportunity on the table and just got a little greedy with the great loss ratios in the past few years? And shouldn't you be willing to tolerate a decent amount of loss ratio deterioration from here and still have a nice business in your underwriting?

Josh, I agree with the premise and the question, and I think we're reflecting that to you. On a comparative basis, AXIS' insurance business is growing fairly healthy. We're very clear about where it's growing. We're posting an 84.5% ex-cat combined ratio. We've raised our attritional loss ratio [ 0.7% ] beyond what was modeled and understood from us to be a target.

I think we're doing exactly what you say. We keep referencing premium adequacy. Our eyes are on the right prize. We're trying to build long-term value creation. We're willing to toggle and mix between all the ratios to optimize an outcome for our shareholders. So respectfully, I think we're doing exactly what you say. We are tolerating growth. We see a very disciplined display of where that growth is coming from, and you see us toggle quarter-to-quarter to optimize the opportunity.

And if we're looking at history as an indicator, if we go 5 years to the future from late '07 by 2012, broadly across the industry, underwriting margins have deteriorated by several hundred basis points, 500 plus more for the best underwriters. Realistically, do you -- does AXIS is it doing things to try and prevent that from happening this time? Or will the cycle ultimately play out like it already does as you plan for long-term strategy in this industry?

I can't predict 5 years out. What I can tell you today is AXIS is expending every reasonable ability and measure to see tomorrow today in all of the information management that we get integrate that information within our integrated underwriting model and take decisions that are for the long term and to be smart as we possibly can be, including our claims insights, our actuarial insights.

And by way of example, you saw AXIS in the last few years, introduce a number of new and expanded propositions. Those propositions and products have served us well, and I think they point directly to your observation about making sure that we see opportunities and equally that we pull back when we see information that is adverse to the long-term value creation of our company. And so we're doing both. We're going to continue to try and do them exemplary, and we're going to continue to focus on the investments we've taken to inform our decisions.

The next question comes from Andrew Andersen with Jefferies.

Matt, I think you mentioned for full year insurance underlying loss ratio up 1.7 points. That would kind of imply greater deterioration in second half. Could you maybe unpack what would drive the incremental deterioration for the back half?

Yes. I think it's continuing to see what we've seen in the second quarter. It's mix. And if we continue to see an acceleration of price decreases, that would allow that to drift a little bit higher. So those are the 2 factors that we're focused on.

Okay. And as you look at the casualty portfolio each quarter, are you seeing anything in observed claim severity or litigation activity, settlement behavior that's kind of different than what is contemplated in your reserve assumptions today?

I would say, overall, look, our reserve position remains strong. We have a lot of focus and robust reserving procedures. We're always analyzing A versus C. You saw we took reserve savings on our short-tail business. And we have and continue to look at long tail. We have continued caution there. We're not seeing anything that we can say would tip us one way or the other at this point. We're monitoring it very closely.

The next question comes from Meyer Shields with KBW.

So one quick question on reserves. I know you've emphasized that it's short tail lines. How many accident years back do the reserve redundancies stem from?

So if the question is what are we seeing in where the short-tail reserve releases were through 6 months, most of those, I would say half of them came from 2023 property. And then the balance of it was spread across a number of the more recent years.

Okay. Perfect. That's helpful. I want to ask sort of the opposite question [indiscernible]. Is there any way of quantifying the premium upside from the Middle East conflict compared to what you were expecting before?

Yes. I'll take that first. And we are active. And as Vince said, we're supporting our clients. We are seeing additional premium. You look at our year-over-year in marine, that is up, and that is reflecting new premium written from the conflict. A lot of these are 7-day policies and pricing is dynamic depending upon where we are in the conflict. But there is some upside of premium that we are now reflecting. And frankly, we're comfortable ensuring that we make the right return profile on the risk we're taking there.

Okay. No, that's helpful. And then I guess a bigger picture question. I was hoping, Vince, you could let us know the level of available talent. Is it -- how is it evolving? Does market softening have an impact on people being available? Are there other trends that we should be keeping an eye on besides, I guess, M&A, which is the typical big dog there?

It's Vince Tizzio. The profile of people being attracted to AXIS really is unrelated to the soft market. I do agree with you that in soft markets, underwriting talent sometimes becomes vulnerable where they are. They don't like the culture shift that sometimes happens when softer markets set in.

So of course, we see some opportunistic people calling and looking for a place to call home. But we're going to remain steadfast by placing first priority on the culture of the organization that we want to attract people with specialized skills, have a collaborative disposition and spirit to work with one another, are ambitious for the long term and have underwriting skills where we're hiring underwriters.

And in all other functions, we have no shortage of people applying for our roles. We're going to remain opportunistic, certainly. And within North America, we've had a demonstrated ability to do that in the last few years convincingly. And in claims, of course, we've added a number of resources. And so there's quite a bit of work going on, of course, in the talent component. And we've promoted a number of our own inside access persons, and we remain very proud with a strong engagement score. And I think that will appeal directly to your question of attracting people.

This concludes our question-and-answer session. I would like to turn the conference back over to Vince Tizzio for any closing remarks.

Thank you for joining us today. We appreciate your time and look forward to continuing to report on our progress as we continue to relentlessly pursue our specialty leadership ambition.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the AXIS Capital First Quarter 2026 Earnings Call. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Cliff Gallant, Head of Investor Relations. Please go ahead, sir.

Thank you. Good morning, and welcome to our first quarter 2026 conference call. Our earnings press release and financial supplement were issued last night. If you would like copies, please visit the Investor Information section of our website at axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast on our website.

Joining me on today's call are Vincent Tizzio, our President and CEO; and Matt Kirk, our CFO. I'd 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 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 the 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, our non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement.

And with that, I'll turn the call over to Vince.

Thank you, Cliff. Good morning, and thank you for joining our call. Let me begin by welcoming Matt Kirk in his first earnings call at AXIS as our Chief Financial Officer. Matt, we're delighted to have your partnership as we continue to steer access to deliver sustained shareholder value. AXIS is off to a very strong start in 2026 as we continue to build on our positive performance we are realizing significant benefits from enhancements we've made to our operating model and through our continued investments in products, distribution, technology and talent.

We entered 2026 well positioned to benefit from all of the actions we've taken in recent years. Our portfolio remediation efforts are largely behind us. Our book of business is premium adequate resilient and positioned for targeted profitable growth. We've made strides in widening our global distribution platform to reach new channels, segments and geographies and. We believe we can further harvest our expanded classes while penetrating attractive markets where access has historically been underrepresented.

We've enhanced our customer value propositions and service model, earning recognition with our highest Net Promoter Scores since we began recording our surveys. And we've made substantial investments in innovations and operations that are helping fuel the momentum in our performance.

I'll now share some of the headline metrics for the quarter. First, an annualized return on average common equity of 17%, a combined ratio of 89.8% gross written premiums of $3.1 billion, up nearly 11% over the prior year, driven predominantly by growth in attractive short-tail lines with short tail lines now constituting 60% of our overall premiums.

Finally, we produced a 10.7% GA ratio in the quarter, driven by efficiency gains and higher earned premium.

Let's now move to our segment results, and we'll begin with insurance. It was a strong quarter for our insurance business, highlighted by premium generations of $1.98 billion, underwriting income of $157 million, representing a 17% increase year-over-year and a combined ratio of 86.3%, a 0.4% improvement over the prior year. Gross written premiums in insurance were up about 20% year-over-year, driven by continued execution in our core business, expanded classes and AXIS Capacity Solutions capability which we will also refer to as ACS.

This growth was reflected across 3 key areas. First, our underlying insurance portfolio demonstrated modest growth. This reflected rate, retention and disciplined underwriting actions across our established businesses and is fully consistent with our return objectives. Second, our expanded business classes contributed high single-digit growth in the quarter. These units are expected to continue to scale our largely short tail and address customer segments in attractive markets. These include wholesale lower middle market, A&H pet insurance and specialty offerings such as Surety, U.S. Marine, Specialty E&O, Allied Health to name just a few.

The remainder of the growth came from AXIS Capacity Solutions, which draws on our experience and ability with third-party capital to develop and structure differentiated portfolios at scale, protecting AXIS's downside and creating new sources of revenue. In ACS, 2/3 of the premiums that we booked were in short tail.

We go to market through a variety of distribution channels that are broadly split between open brokerage and select delegated businesses. These structures allow us to access premium adequate business while enhancing our relevance with distribution partners and generating attractive returns and fee income with limited balance sheet volatility.

Looking across the broader insurance landscape, we continue to navigate a series of micro markets driven by a changing pricing environment, sustained geopolitical uncertainty and technological disruption. We would observe that while pricing pressure is evident in several lines, terms, conditions and limits are generally holding, and we are seeing premium adequacy across the vast majority of our business.

Our average net policy limits remain largely unchanged in markets facing the greatest competitive pressure, including property and cyber as 2 notable examples. As respect to geopolitical disruption, certain lines of business have changing demand needs from our buying population, including lines such as marine war, energy and political violence to name 3.

In the Middle East, we continue to actively support our customers. While information is continuously developing, we are practicing vigilance and are very closely monitoring our exposures in the region. We are supporting our customers in managing emerging technological risks, including intensifying cyber threats brought on by AI, new data privacy concerns and the interconnected nature of operational and supply chain risks.

These unfolding dynamics are creating new exposures and opportunities for us to provide specialty solutions. Taken together in this transformational risk environment, our customers are seeking tailored solutions to address their evolving needs. And as a specialist leader, AXIS is well positioned. Let me comment now on what we're observing across our lines of business. In property, pricing was down 13% in the quarter. This downward pressure on pricing follows an 8-year period where we've had compounded rates of nearly 80%.

On an absolute basis, the business we're putting on our books today continues to meet our underwriting return expectations for the class. Additionally, we maintain a diversified portfolio with an average net limit in the low single-digit millions that is well balanced in peril and geographic mix and is backed by Cat XOL protection that attaches at $100 million per event.

In liability, rates grew 9% in the quarter, and growth was 11%, and we leaned into opportunistic growth in our international liability businesses, which helps provide diversification from the social inflation phenomenon in the U.S. casualty market and we exhibited a disciplined stance in U.S. casualty.

In fact, in U.S. Excess Casualty, total writings were down 2% with positive rate change of 12% ahead of trend in primary casualty volume was down 28%, with positive rate change of 9%, again, ahead of trend. In professional, we are encouraged with rates turning positive especially across transactional liability and pockets of commercial D&O and financial institutions within our North American businesses.

In the quarter, $45 million our growth came from transactional liability, where rates were up 4%. And from E&O, where we are delivering on our risk-adjusted return expectations. Consistent with our past comments, we observed a flattening on the public company D&O market and remain cautious while selectively evaluating opportunities. Within cyber, consistent with prior quarters, we maintain a cautious underwriting stance as the industry navigates a dynamic market impacted by both the rating environment and the exposure gained by AI.

The market remains competitive and rates were down 6% in the quarter. We deployed capacity selectively between our cyber insurance and reinsurance platforms, managing our exposures and steering our capital towards the best returns. In the quarter, at a group level, our growth was down 7%. In our insurance portfolio, we were virtually flat with $6 million in premium growth.

Please be reminded that we've been signaling caution with cyber for the past few years. For context, at year-end 2023, AXIS produced $649 million in cyber insurance production at that time, representing 10.6% of our total insurance portfolio. At year-end 2025, that number was $473 million, representing 6.6% of our portfolio.

Nonetheless, if the rate environment and our view of the market improves, we will draw on our skilled team, capital and grow more fulsomely. Stepping back, we're clearly observing varying conditions across our lines of business. We have demonstrated our ability to strongly cycle manage with an approach that is highly responsive to shifts in the environment. By example, our discipline is evidenced in recent years by our actions in primary casualty, public D&O and cyber and most recently, by the caution we are exercising in our U.S. casualty and London market property lines.

In parallel, we are reallocating capital into attractive markets through our expanded classes which over several years, have grown from a nominal base into 17% of our total insurance portfolio in the first quarter and nearly 2/3 of the business is short tail.

Let's now move on to our reinsurance segment. In the quarter, we continued to drive selective growth in our specialty product set with short-tail lines growing from 50% to 61% as compared to the prior year period. We drove $1.1 billion in gross written premiums. This includes $180 million of new business with 70% coming from short-tail specialty lines. We produced a combined ratio of 92.7% and underwriting income of $30 million and fee income of $20 million.

Leveraging our deep specialty expertise, we generated healthy growth in targeted lines like A&H and credit and Surety where we leaned into strong relationships with existing cedents exhibiting the transactional excellence of our team. Consistent with our comments in past calls, we continue to actively manage the cycle in casualty lines. In the quarter, we reduced writings by over $130 million or 24% as the market remains competitive and risk-adjusted returns are not meeting our expectations.

Switching gears. Within our How We Work program, and specifically in relation to emerging technology and AI, I'll speak briefly to some of the advancements we are making. We have several objectives that ground our AI strategy, create efficiency, enhance productivity and ultimately deliver risk insight to help enable profitable growth.

Our AI investments are contributing to expense ratio efficiency by redesigning and streamlining end-to-end workflows. This is shifting routine work for manual processing to technology-enabled task transfer and automation in underwriting and operations. While allowing us to hire purposefully into greater value roles rather than scale headcount broadly.

Underpinning our efforts is the advancements we are driving within our operations function. This includes our early progress in leveraging AI and data and analytics to enhance how submissions are triaged, analyzed and prepared. And we focused on identifying opportunities to utilize AI to drive increased automation in how operation supports our underwriting and claims teams while, of course, further reducing manual work.

I'll share some of the specific examples of how we're leveraging AI. We're seeing tangible productivity and efficiency gains through 2 examples. First, where we have introduced auto ingestion, the time to clear, register and route submissions to our signed underwriters has improved by over 65% in our initial rollout.

Second, we've spoken with you in the past about our end-to-end next-generation underwriting platform. Progress continues. The platform has proven to reduce quote cycle time by up to 30% in the initial areas where we have deployed the new systems. Within claims, we are progressing in tapping into the promise of AI. By example, we're building new functionality to enable our claims team to utilize agentic AI to process by way of example, first notice of loss data to improve speed and ensure consistency and accuracy.

As respect to our broader AI strategy, we see people at the core of our approach, not only in terms of responsible adoption, but in respect to innovation and imagination, and we are investing in upskilling our teams and recruiting AI-ready talent.

Finally, I'll conclude my opening remarks by pointing to the same key takeaways that I shared with you during my year-end tons. We believe AXIS is built for all seasons. We are positioned for continued profitable growth aligned to our strategic initiatives. We've instilled a disciplined underwriting culture that puts profits ahead of premiums. We've built a global multi-varied distribution platform that is grounded in customer centricity and we've grown a culture that prioritizes both performance and people.

With that, I'll now pass the floor to Matt for his comments.

Thank you, Vince, and good morning, everyone. AXIS had a strong first quarter. So let me step you through our results. Our net income available to common shareholders was $247 million, or $3.29 per diluted common share, resulting in an annualized ROE of 17%. Our operating income was $257 million or $3.42 per diluted common share, resulted in an annualized operating ROE of 18%.

Starting with our group underwriting highlights. Our gross written premiums of just over $3 billion were up 11% over the prior year quarter driven by accelerated growth initiatives in insurance, which I will detail shortly. On a net basis, premiums were up 9%.

As Vince mentioned, but worth repeating, we reported a combined ratio of 89.8%. Cat losses were $48 million, producing a cat loss ratio of 3.2%. Cat losses were largely driven from extreme winter weather in the U.S. and approximately 1/3 came from losses related to the conflict in the Middle East.

We recorded a reserve release of $18 million with $15 million in insurance and $3 million in reinsurance for the quarter. We are maintaining the access philosophy of being deliberate to acknowledge favorable trends while quickly assimilating the adverse. Our release continues to be from short-tail lines.

As Vince mentioned, our consolidated G&A ratio for the quarter, including corporate, was 10.7% versus 11.9% a year ago as dollar spend on G&A was essentially flat year-over-year. We're pleased to have achieved the target level we presented to you 2 years ago. For the full year, we are still targeting 11%, and I would remind you that as we discussed on the fourth quarter call, we will continue to make attractive investments when opportunities arise and reward our high performers.

I would note at this juncture, we incurred a below-the-line charge of $23 million for expense and restructuring actions taken during the quarter, largely in reinsurance as well as for the planned departure of 2 members of our senior leadership.

Underwriting fees were $23 million, including both insurance-related and other income and offsets the G&A. Today, this attractive stream of fee income largely stems from our ILS investments, but we expect a growing contribution from ACS. Insurance had a strong all-around quarter with gross written premiums of almost $2 billion, up 20%, driven by several factors.

Let me provide you some detail. As Vince discussed, our underlying insurance book grew at low single digits, while expanded products and initiatives accounted for growth in the high single-digit range. Additional growth of approximately 10 points came from our innovations of ACS. You are familiar with the Ryan deal, which is performing as expected.

ACS also struck funds at Lloyd's or FAL transactions, accounting for approximately half of the 10 points. These are 1/1 incepting annual renewable transactions where we provide capacity to other syndicates at Lloyd's. In a capital-efficient manner, we are gaining exposure to products, geographies and distributions that would not have been easily accessible to access, adding to our portfolio diversification.

Finally, ACS included the strategic use of reinsurance vehicles. These transactions enable us to align interest with our key distribution partners to expand our gross insurance lines, earn fee income while managing our net appetite and exposures through sessions to third-party vehicles. In the first quarter, we employed this capability primarily in the premium adequate property classes.

Our net written premium growth of 24% was higher than our growth due to the number of factors, which will normalize as we progress through the year. These include the FAL business, which is kept net, a change in our quota share for pet and some year-over-year quarterly timing distortions.

Our underlying loss ratio in insurance was 53.3%, a point higher than the prior quarter and in line with our forecast in the fourth quarter. We have not changed the range of our expectation for the year.

Turning to Reinsurance. Gross written premiums were down 2%. We grew 20% in short-tail lines led by Credit and Surety, which we do not expect in future quarters, although we will remain actively engaged in evaluating new opportunities. Long-tail lines were down 24% and as continue to have a cautious stance in these areas. The cycle management in long-tail lines will persist as we progress through the year, and I will echo our fourth quarter comment that we expect reinsurance premiums could be down double digits in 2026. The reinsurance combined ratio was 92.7% for the quarter and in line with our expectations.

Stepping back, what you are seeing this year is active portfolio repositioning at work. We are intentionally leaning further into insurance and being more selective in reinsurance. We are using third-party structures and vehicles to enhance our relevancy to clients and distribution partners to sustain top line momentum, protect our net exposure and generate fee income. This is disciplined cycle management in action. We are making these moves deliberately and decisively, and we remain confident in our ability to manage through the cycle profitably.

Turning to investments in capital. Investment income was $185 million, similar to the level of the fourth quarter as our book yield remained largely flat. From a total portfolio return perspective, much of this was offset by unrealized losses in the period, a result of market fluctuations in rate and spreads and a headwind to book value per share growth in the quarter.

We remain in a very strong financial position, allowing us to return capital to shareholders through dividends and share repurchases, while prioritizing organic growth opportunities. During the quarter, we returned $93 million to shareholders through dividends of $33 million and share repurchases of $60 million. At quarter's end, $53 million remained on our 2025 $400 million authorization. And during the quarter, management presented and the Board approved an additional $300 million authorization. Our operating cash flow in the quarter was a strong $590 million, up from $309 million a year ago, a reflection of our premium growth and expense discipline.

I'm pleased to start my tenure at AXIS on such a strong foot. We will remain focused on managing our exposures to bring consistent and predictable earnings to shareholders. I look forward to working with you to create shareholder value for us all. Now we'd be happy to answer your questions.

[Operator Instructions] And today's first question comes from Andrew Kligerman with TD Cowen.

First question is around reserve development. It looks like you had a favorable development of $15 million in insurance, $3 million in reinsurance. Some of your competitors have reported some unfavorable developments in the 21 to 24 underwriting years. Could you give any color on the developments from '21 to '24 and how that's playing out?

Andrew, Matt, thanks for the question. I think overall, we're comfortable with our loss reserve position. I mentioned our philosophy that we are going to be slow to recognize good news and very deliberate when we have concerns. So let me just talk about the -- in the quarter, $18 million, almost all came from short-tail lines. I wouldn't get into the years right now, predominantly on the insurance side with a few million on reinsurance.

Andrew, this is Vince. Just to come over the top. We have discussed with you and Pete and I over the last several years the actions that led ultimately to the reserve charge that we took back in December of '23. The assumption sets that we put forward, the exhaustive list of considerations that we had shared with you have continuously served us well in our quarterly reviews.

The number of tools that we've attached both from additional claims insights, enhanced actuarial insights remain ongoing and give us comfort. That is not to say that we've taken our eye with any passing relief, which is to say we've demonstrated a cautious underwriting stance in the casualty classes generally and across both platforms.

We've spoken often about our caution in reinsurance, and you've seen that reflected in the rate of growth, which has actually not occurred. And you've seen that deliberately here on the insurance platform where in the quarter, both of our casualty platforms in the U.S. were downsized. So we have caution, but we're comfortable with our picks. And we're going to maintain an active stance in managing our reserve position.

Great. And my follow-up, Vincent, in your remarks, you mentioned that property pricing was down 13%, but the stuff that you did -- I'm sorry, not -- yes, I think it was pricing down 13%, and it met your -- but what you wrote met your return expectations. And it sounds like some of your ACS business through Lloyd's was property as well. So I'm wondering, could you talk a little bit about your return expectations in the property business that you've written in insurance, including the ACF stuff?

Yes. Andrew, I'll take the liberty to expand my answer more broadly as well if you permit me, which is we have indicated over the past several years, a mid-teens return on equity expectation in our portfolio. You know directly from our Investor Day, we grounded ourselves in measuring effectiveness and success against diluted book value per share growth. And so as you know, we're an underwriting led organization.

We will not grow for growth's sake. We acknowledge and we certainly are witnessing the repricing of the property market, but you're speaking to AXIS. AXIS has had over nearly 80% of compounded rate improvement over the last several years against a portfolio that has about 40% ex cat in its overall makeup. A low single million dollar limit profile and the ability with the support of our reinsurers, importantly to note, a $100 million per event cover.

So we're not living in a different reality. We are acknowledging that the order of returns is coming down. But at this point in time, it still meets our risk-adjusted returns. And I would just, as I said before, take the liberty to expand a bit, the growth that you're witnessing from AXIS is very much aligned to the fourth quarter remarks that Pete and I shared. And I'll remind you as you've been with us throughout this journey. Some years ago, 3 years ago, specifically, we signaled a transformation effort. This transformation effort was first focused on our balance sheet, bringing strength to our capital position, the reserve charge, the LPT, the additional actuarial insights, building capabilities in our claims and operations, bringing new talent and yes, expanding and creating new propositions, admittedly with very low start points.

If you were to look at the North American build-out that Mike and his team have executed against our start points in classes like environmental, Allied Health, E&O generally. They're rather small businesses that are growing. And so their order of percentages feel substantial.

But I'll remind you and all of our investors importantly, that our start point is coming from a very strong place in terms of mix. Our premium adequacy guidelines are explicit our underwriting tools and the provision of tiering and many others, the coordination between claims, actuarial is very strong. And so I take the liberty of expanding my answer to your direct question on property, but I'm happy to take additional questions.

And the next question comes from Rob Koh with Goldman Sachs.

So AXIS is generating really strong growth in the core franchise. And I think the company has a relatively substantial position in Lloyd's relative to peers. So I'm just curious what made the funds at Lloyd's opportunity so attractive at this time? And if we should be thinking about this as an opportunistic trade to capture healthy margins for 2026? Or will this be a more sustainable part of the portfolio going forward?

Rob, it's Matt. Let me cover that. First, not everyone is familiar with these type of transactions. Here in this case, we provide capacity in a structured format more like pro rata reinsurance to syndicate at Lloyd's. These are 1/1 deals and they would not be repeated in the quarter. So you're seeing most of our premium, if not all, written upfront, roughly about $60 million, and that will earn across this year and next.

I think what's important is these are FAL transactions where AXIS is gaining exposure to products and geographies that we would not other easily be accessible to AXIS. These products are niche specialty lines that require specialty underwriting expertise. Now we think these lines of business, these syndicates that we're supporting provide attractive profitability and they're really an efficient use of capital. What makes it a little unique on these transactions is our downside is capped to our committed lines, and that's pretty modest compared to our premium.

So overall, something new to access. I would say we're really selective. We did a handful of these transactions in the quarter. Those won't be available to us until this time next year, should we choose. They are in the industry and relatively standard, but we view this as just another mechanism to be able to tap into specialty expertise.

And Rob, this is Vince. Just coming over the top with a couple of comments. Firstly, AXIS enjoys an outperform designation in our Lloyd's syndicate. We have a number of leading propositions. We also, in our global market business report our global businesses through global markets. And so in terms of sizing, we are a confident and a strong sized Lloyd's market participant. And as Matt detailed, this is just one of the strategic capabilities that we leaned into in the first quarter in support of our global strategy, but with a lot of help from our AXIS capacity teammates.

That's very helpful. And I just want to follow up on the underlying loss ratio. So it picked up 100 basis points in the quarter, which was in line with comments for 2026 expectations. How should we think about some of this new business coming on from funds at Lloyd's, but also the Ryan deal? And how might that affect the underlying loss ratio going forward?

Yes. I would say the point is a good barometer. We did guide that in Q4, and that's what we're seeing. And it will be around that for the year, and we will guide if that's different. But that's what we're seeing. Ryan Specialty, which is, we signed up for last year, that was well within our estimations when we came up at that point. And these FAL deals, these are no different, right? We are not taking different loss picks or different expectations. They need to meet our pricing hurdles. So I would say these should not change or would not change our overall estimation of where we're headed with our loss ratio.

And if -- Rob, if you look at the core components of the growth, of course, our core portfolio and our expanded classes, that's nearly 10-odd percent of the growth in the quarter. 60-odd percent of it short tail. We have a very good composite of what our loss ratio performance is. We have the analytics to support that, the integrated underwriting model between claims and actuarial gives us confidence around that. But I think Matt is exactly right. I think what we guided to in the fourth quarter is where we'll end up at the end of 2026 in insurance ex cat.

And our next question comes from Elyse Greenspan with Wells Fargo.

My first question is just on the premium growth, I guess, away from ACS. So within insurance, I think you were guiding mid- to high single digits. I think it came in at high single digits, maybe even a little bit above. So how do you see, I guess, the core growth trending during the year relative to your prior guidance?

Elyse, it's Matt. I don't think we're going to change anything. We guided on our underlying portfolio to low single digits, and that's what we're seeing. And we said our expanded lines would take us to high single digits. So at least no change to that. I think what we've highlighted is the ACS capability, which we also said would take us into the double digits, and that's still the case. And obviously, we have the FAL transactions, which is new this quarter, so we wanted to give guidance on that. But on the underlying, no changes.

Elyse, obviously, I agree with Matt. And we reserve, of course, the ability to come back in the course of the year. If we see massive changes against our assumption sets, not only in rate, but also the widening of terms and conditions or expectations on limit grant we find unreasonable, you have seen and we have evidence to you and others an ability to reshape our portfolios comprehensively, thoughtfully and with a high degree of execution.

And I don't need to recount for you the number of portfolios that we've reshaped over the last 3 years. But I think that's exactly right. With what we see today, we like the words that we guided in the fourth quarter, prevailing at the end of the first quarter of this year.

And then my second question is on capital. Buybacks did slow in the quarter. Obviously, growth did pick up, but how are you balancing, I guess, your view on growth versus potential share repurchases from here?

Yes, Elyse, great. And as you know, I'm passionate about capital allocation. You hit it with one of your comments there. We are still growing. We're comfortably growing and our capital is going to first support that. From a share repurchase perspective, let me just reframe, we came up off 2025 with a really great opportunity to do some block trades returning $888 million. That was somewhat unusual. I would say our returns will normalize this year, but let me just call out in the 2025 repurchase program, we have capacity left that we're using now. We also management brought to the Board and received authorization for another $300 million.

And I would say the $60 million that you've seen in the Q1, I would not assign that to be a run rate we're going to be opportunistic, and you could see that tick up through the year. Finally, and this is just my personal view, where we're trading, I think, is a really great value opportunity to repurchase shares. And so it's something that we're going to obviously lean into once we first support our organic growth.

The next question is from Rowland Mayor with RBC.

Just to quickly follow up on Elyse's question on buybacks. Was there anything that restricted buybacks in January I was a bit surprised to see that month close to 0. I guess, Matt, you commented on not the run rate, but what February and March run rate would be a better way to think about it?

Rowland, I'm going to start and ask Matt to come up to the top. Look, if you think about our prepared remarks, we're navigating the company in fairly turbulent environments in all manners of what that word can note. We we're going to continue to execute with the stated buyback strategy that we've had, opportunistic.

Matt and I have brought a more strategic focus to the order of opportunism. And I think if you were to look for a run rate I think there's a pretty clear sign that we wouldn't have gone to our Board for authorization. If we had conviction that we were fully valued or thought that we couldn't sustain the profitable growth journey that we've been on. But we're going to remain disciplined. We're going to remain opportunistic, but we're also going to be mindful of all the different levers that we've been pulling. And I think when Matt detailed what we did in 2025, it's a pretty good barometer of looking at how we can execute, how we can mobilize. And yes, of course, I agree that it was outsized. Matt, I apologize. Go ahead.

No, no, nothing more to add, Rowland. I think we hit it right there. So stay tuned, and we'll remain opportunistic.

I appreciate that. I just wanted to pivot to the Credit and Surety reinsurance growth. It was up 50% year-over-year, and that sounded like several years of really strong growth there. Where is it growing now? And can you talk maybe a bit about the exposure in that business?

That's a great performing business for AXIS. It's historical, as you know. We have incredible teammates that have been leading that business. They are well tenured. Here, we simply grew shares with existing cedents. This was structured transactions that we are very adept at. The good news is they come from cedents that we know that we have historical loss experience and portfolio experience with.

So we're very comfortable. I would not look at what they produced in the first quarter as the run rate for the full year. This is an outsized level of growth in the quarter. This group will continue to grow in 2026, but simply not at this order of magnitude.

The next question is from Josh Shanker with Bank of America.

I want to comment the questions on capital return a little bit differently. In the budget for 2026, how much capital are you thinking you're going to need to deploy into the business in order to support the growth?

Yes. I mean, tough to give really good tight guidance there. But I'd say round numbers, let's just call that about 50% supporting our growth.

The 50% of earnings generated this year will be needed to support the growth you're going to generate?

Yes. I mean we don't -- that's broadly in line. Yes.

And looking out into the -- like you do have multiyear plans. Obviously, we don't know what market conditions are going to be 1 year from now. But with your partners, you have commitments that are not just on a 1-year basis. Depending on market conditions, does that mean we should think over a 3-year period, normally, you're going to need to be putting about 50% of what you're generating into within a range, 30% to 70%, whatever, but into the business that -- or in 2027, can it be that you're not going to grow anymore and you might be able to return 100% of capital?

Josh, it's -- I'd love to be more explicit for you. This is Vince. Unfortunately, we're not going to be able to. The number of factors that are accounted for our capital strategy, you can only imagine. And so when you think about '26 and you think about our capital position, we're using a lot of our excess capital to grow the business. You've seen where we're growing it, how we're growing it. We have capital that's being allocated to our How We Work, investments in orders of technology and other set capabilities.

What I think Matt said is a good benchmark for '26. I don't think we want to get into the 3-year plan and all of the component parts we can unfold more of that as the year shows itself. But we're going to remain agile. We're going to remain shareholder focused and most importantly, bottom line focused.

And the next question comes from Charlie Lederer with BMO Capital Markets.

So the operating leverage in insurance came through in the G&A ratio in a big way this quarter. Wondering if we just look at the absolute dollars there, it was flattish. Given some of the AI initiatives that you laid out, Vince, I'm assuming there's some increased tax spending. Just wondering what's offsetting that, if that's correct or if there's some other moving pieces in there?

Yes. Look, it's Matt. I think it's a good question. We are pleased with where the expense ratio came in at 10.7%, and we're guiding again 11% for the year. You're absolutely right, expenses year-over-year is relatively flat, and that does call in and shows the benefit of all the investments we've made in technology, including AI, where we're able to write a lot more high-quality business on the same expense base.

So we've talked about it, and Vince has been talking about this for a couple of years, investing in our people, investing in our technology, we've been pounding that's saying this is going to come through in our operational efficiency, and we're seeing it. And we feel good about our landing coming in around 11%. Vince, do you want to add anything?

Charlie, I think that Matt covered it. The only thing I would say is we acknowledge the 1.3 point difference in GA in the Insurance segment in 1Q. But we're continuing to invest. You should not really mistake the language we shared with Yaron last year in the fourth quarter. We are not going to forsake investments in people, capability buildings in our claims organizations, operations, certainly, the body of work that Ann Haugh is now leading as our COO.

We're going to continue to invest. We're going to make certain that the business cases can be justified and that Matt will certainly run point on that. But I would look at us more as an 11% GA company at the end of this year.

And then on the net to gross written premium ratios we saw some fairly larger moves in both insurance even when excluding FAL and in reinsurance. Can you break those down? And is some of this permanent or is there some other onetime noise in there?

Yes. There's a lot of noise. And I think you're going to see, particularly on insurance, the trend reversed to normalize. But let me just call out. What you're seeing in Q1 is our net written premium growth was 24%, higher than the 20% on gross, and that is somewhat unusual.

Two things in the quarter. The FAL transactions, as you said, come net to us, so we have no reinsurance on that. That's roughly 2 points and we did retain more of our A&H business that relates to our pet business, reducing that quota share. So that's 2 items in the quarter. We also have some noise year-over-year. Last year, in Q2, we reduced our quota shares on excess and LMM, and that really is falling through and is not comparable to this first quarter this year. So that is some year-over-year noise. You're going to get to the end of the year, and this will reverse and you'll see that pattern reverse completely.

On the reinsurance side, you're absolutely right. You're seeing large decreases in net written, roughly 13 points. That compares to our gross down 2 points. That's quite intentional -- where we've guided that we're focused on reducing our sessions in GL & PL. And we're also -- I'm sorry, reducing our writings in GL & PL, and we've also increased our sessions to our third-party capital providers. So that trend will continue throughout the rest of the year.

And if I could just squeeze one last one in. We saw some industry loss estimates for the Baltimore Bridge tragedy from a few years ago move up this year. Are you guys fully reserved there? And how should we think about that?

Yes, it is a tragedy. So let me just give you a quick answer and then maybe allow me a few minutes to talk about it a little further. So in the quarter, we didn't have to move our loss reserves. We were conservatively picked, and we did have a small amount of reinstatements that we're going to need to pay. I think the broader point here is when I was thinking about coming to AXIS and speaking to Vince, he told us our reserves are conservatively picked. And then in my first 4 or 5 months here working with our actuarial team, I've seen that in action.

And this is a perfect case where we really did not have any movements in our loss reserves. The increase in the expected industry loss was not a surprise to us, and it shows again that when it comes to loss picks, we're going to be conservative and really mine the books and only take good news when we have -- we're sure on it. So just overall, no movements in Baltimore Bridge other than reinstatement premiums that we're pleased to report.

And our next question comes from Anri Gavasheli with Mizuho.

Anri, representing Yaron Kinar here. My first question is about top line growth in insurance. There is some investment concerns surrounding the accelerated top line growth in insurance in the face of some market softening and MGA competition. how would you address those concerns over the long-term profitability of new added business?

Anri, Vincent here. Again, we place bottom line ahead of top line. I would encourage you to look at where we grew. If you look at our core business, that grew sub-5%. Our expanded classes, which we've detailed for you over the last couple of years, grew some 7-odd percent, almost 7.5%, 7%, excuse me. And the balance came from ACS, where Matt really detailed the alignment of economic interests that we assure ourselves.

I want to conclude by saying we will not grow for the sake of growing. We will grow guided by our 2 principles of diluted book value per share growth for the company but in our risk-to-risk business, achieving risk-adjusted returns that meet our hurdle rates, which we've detailed.

And in part, this is exactly why I said to Elyse, if we think the market turns in a particular way that starts to prevent that, we will sum in the same courage we have over the many years in reshaping our portfolio. But the combination of investments that we've taken over the last 3 years gives us confidence at the moment that we can continue to grow our expanded classes, have moderate to nominal growth in our core portfolio and selective growth in our ACS portfolio.

And the next question comes from Meyer Shields with KBW.

Can you hear me?

No, now we can, Meyer. Can you kindly restate what you were saying?

This is Scott on for Meyer. My question is on your prepared remarks on cyber insurance. You talked about remaining cautious and you've pulled back cyber exposure over the last couple of quarters and years. Growth did pick up this quarter. So I'm wondering are you seeing more adequate pricing even though rates are down? And then kind of follow-up to that with recent developments in AI, such as Anthropic's Mythos model. Does that change how you guys have approached writing cyber in terms of terms and conditions?

And then do you think there's going to be a shift in the industry overall?

I didn't catch your first name, so I apologize, but I would acknowledge that $6 million of growth in the insurance segment is relatively flat when you think about the scale of the business. So we have a very cautious eye. And in the aggregate, our company downsized our cyber writings and you accurately accounted for the sizing of the business over the last couple of years. with specific reference to the impact of Mythos and Anthropic.

For us, it is another example of the humility that we take to this class. How? Vulnerability in the security protocols of companies are facing yet another challenge, another challenge. Mythos makes the challenge more difficult as it's been well chronicled than a number of the articles that have been written. The ability for the perpetration of identifying the vulnerabilities without massive human capital now done through the AI tool exacerbates and makes more difficult in our judgment, the middle market and the small commercial concern.

You may recall from prior calls, AXIS and its underwriting focus has steered its attention to the large account segment, betting on the hygiene standards that we bring generally to the underwriting process of cyber in reliance on the financial wherewithal to have the said tools and capabilities that meet this emerging exposure that is only being deepened by Anthropic's tool provided the threat actors become in the possession of it and are able to weaponize it.

Equally, we have a partnership with Alpha Secure. We're a proud supporter of our partnership there. We have a financial interest in that organization as well. They are helping us prosecute our middle market strategy. Importantly, they have the said capabilities at risk diagnosis that extend beyond the underwriting process at the renewals. So we have surveillance abilities throughout the policy period.

Net-net, AXIS has a cautious view -- you could see that materially in the downsizing of our reinsurance cyber portfolio. You can see that largely in our insurance portfolio, I would not characterize $6 million as meaningful growth. And I would also point to we're cautioned broadly around the risk reward. So to answer the end part of your question, we think this class should be repriced. We think there's enough ingredients in the loss environment. There's enough reason for caution to be extended, limits management to be extended, all the ingredients that we think at AXIS were executing. Hopefully, that addresses your question.

Yes. Great. And then my second question is on the Middle East conflict. Matt talked about how about 1/3 of cat losses came stemming from the Middle East conflict. Has the conflict provided any opportunities in terms of rate increases for the lines affected? Or is it those the conflict kind of caused you guys to be cautious with those risks?

I would say modest, but I would feel remiss if I didn't congratulate my underwriting teams out of London that have been completely all over it, and they're very noted practitioners in the marketplace, and I would reason with you globally. So I'm very proud of how they have been navigating very uncertain times. So we've had selective and modest writings since the war was announced.

We remain very interactive with our third-party consultants for vision on the ground in terms of our risk profile. We know exactly where our exposures are. We put up a provision of $15 million thoughtfully. We do expect, as time proceeds, some increase to that number. We don't think it's outsized with the available information we have today. But we're very encouraged by what we've been analyzing, reviewing, and we think that what we've picked is a proper measurement.

Matt, if you want to come over the top?

Yes. I would just say this was great for me to see the exposure management team at work. I mean the moment this conflict picked up our team mobilized. We have a great understanding of our limits our exposures. We came up with the $15 million based upon that, based upon notices we've received based upon advisers we have on the ground. And so $15 million is a round number. Could it increase, as Vince said? Sure, sure it could, but we feel very comfortable as we have a great understanding of our limited exposures.

And the next question comes from Andrew Anderson with Jefferies.

This is Charlie on for Andrew. So my first question is just on insurance. How sensitive is the loss ratio there to further deterioration in property pricing? And how does that compare to how you guys are thinking about loss trend and reserve adequacy on the long-tail side?

So Charlie, this is Vince. How sensitive? I'm not sure how to answer that other than to say, we know the collars of orders of rate change that would change our view of risk and our underlying loss ratio assumption. I'm not going to stipulate to what that is exactly. But I think it's the right question that would give confidence to our investors that we're not looking at the achievement of the gross line indifferent to both our loss picks, the mix of the business that's coming in or our net retention.

And so will we, at an appropriate time, signal should rate deterioration extend beyond a point of tolerance? Most assuredly. How will you see that reflected? You'll see it as you've seen it in other classes, Charlie, by way of memory, primary casualty, public D&O, delegated cyber, we will begin to reshape those portfolios quickly and with earnestness. Hopefully, that gives you help on the question.

Yes. Yes, for sure. And then just a quick follow-up kind of along that line. It looks like the paid to incurred kind of dropped a little bit relative to where it was trending in the past few quarters. Is there anything -- I mean, would you guys attribute that mostly to like timing or cat experience versus how much of that reflects changes in underlying claims development patterns?

I think we're going to tag team this, Matt.

Let me go ahead. Yes. So look, we're well aware of the attention that this data point gets. And we'll say the same thing now when the time that the ratio is trending lower as we did when it was trending higher. It's 1 data point of many that we look at our portfolio and held by itself, it's not a good metric. So you're seeing it improve on insurance. You're seeing it on improved on reinsurance.

That's good news, but it will continue to be volatile. And we, as an organization, look at a number of metrics to manage and understand these relationships. So I'll just leave there. Vince, anything to add?

I think you covered it right. We've unpacked reasons why we think that ratio by itself is not very indicative of much. I think you've fashioned the reason for that. There's lots of reasons it could move. But we're comfortable with where it is balanced against our other indices, which we've outlined in the past that have really involved claims expectancy, reserve adequacy and many other factors, but I'll leave it there, Charlie.

And this concludes today's question-and-answer session. I would now like to turn the conference back over to Vince Tizzio, CEO, for any closing remarks.

Thank you, operator. Thank you all for your time and your questions today. We appreciate it. I want to extend sincere appreciation to all of our AXIS colleagues for their earnest effort, our shareholders and customers for your belief and conviction in our company. We earn your trust each day with confidence and responsibility. We look forward to reporting our progress at the 2Q mark and look forward to chatting with all of you in the interim. Thank you.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

Good morning, and welcome to the AXIS Capital Fourth Quarter 2020 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Cliff Gallant, Head of Investor Relations and Corporate Development. Please go ahead.

Thank you. Good morning, and welcome to our fourth quarter 2025 conference call. Our earnings press release and financial supplement were issued last night. If you would like one, please visit the Investor Information section of our website at axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast on our website. Joining me on today's call are Vince Tizzio, our President and CEO; and Pete Vogt, our CFO. In addition, for the Q&A portion of our call, we'll be joined by Matt Kirk, our incoming CFO.

We I'd 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 to 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 the 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, our non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement. And with that, I'll turn the call over to Vince.

Thank you, Cliff. Good morning, and thank you for joining our call. The fourth quarter marked the close of an excellent year for Axis as we built upon our track record of sustained positive results with 13 quarters of increases in diluted book value per share growth and 77% growth over that period. Our performance has been consistent, and our actions have aligned with the core principles that we laid out at our Investor Day in May of '24. In 2025, this translated to strong results across our key indices as we leaned into attractive specialty markets drove increased profitable growth that was largely propelled by our new and expanded business classes and further enhanced our operating efficiency.

I'll share some of the headline metrics for 2025. 18% year-over-year increase in diluted book value per common share at $77.20, 18% operating return on equity, record gross written premiums of $9.6 billion up 7% over the prior year and a combined ratio of 89.8 our lowest full year combined ratio since 2010. We entered 2026 well positioned to advance our momentum and have confidence in our ability to execute. I'll share 5 key messages that we would like our listeners to take from this call.

First, AXIS is built for all seasons. As a specialist, we have an operating model that enables us to leverage our size and speed to pivot as needed across our business lines and geographies serving as a competitive differentiator in today's changing risk landscape. Second, we're poised for profitable growth driven by our strategic initiatives. We would point directly to our new and expanded business classes as well as the growing contributions from our dedicated lower middle market units and our recently introduced access capacity solutions as proof points.

Third, disciplined cycle management. Our growth will not come at the expense of bottom line, and we remain steadfast in putting profits above premiums. In recent years, we have instilled a culture of strong cycle management as evidenced by the repositioning of several of our businesses. You may recall the actions taken in primary casualty, cyber and public D&O as just 3 examples. Four, our global distribution model, our multivariate distribution platform is grounded in customer centricity and deep broker partnerships that we've worked diligently to nurture.

In our most recent annual broker survey, this was reflected by top quartile Net Promoter Scores and the recognition of AXIS in its specialty leadership positions. Five, finally, we've driven a performance culture. We have built a culture that is both results-driven and people-oriented, encouraging exceptional work through our pay-for-performance model. Further, in recent years, we've built a strong and talented team while providing a favorable workplace environment that has earned AXIS numerous awards and recognitions.

In supporting each of these areas, we continue to invest significant resources to our how we work transformation program, which is driving continued improvements across our business and operating model, leveraging enhanced technology and AI solutions. The investments we are making through our Hawley Work program are reflective of the commitment we made at our Investor Day to deploy $100 million to strengthen our operations and how we go to market. We accelerated these efforts in 2025 and indeed, raised our investment threshold with an emphasis on scaling our new and expanded line and integrating a new AI-enabled front end within our organization.

We're pleased with the momentum that's coming from these investments. Let's now discuss our segment results. We'll begin with insurance. Our Insurance segment produced outstanding results in 2025 and including several all-time highs, record gross written premiums of $7.2 billion, a 9% increase over the prior year, record new premiums written of $2.4 billion, record underwriting income of $597 million, a 40% increase over the prior year. And finally, a combined ratio of 86%, a 3 percentage point improvement over the prior year.

In North America, we delivered standout performance with gross written premiums up 10%, reflecting the benefits of strategic investments in product and channel expansion, coupled with significant underwriting platform enhances. These efforts are continuing to unlock new opportunities in our targeted markets. In global markets, results were strong as we leveraged our lead line product positions and multi-platform solutions, including Lloyd's, while driving a 6% increase in gross written premiums.

Key drivers included marine, energy and construction, lines where we have strong margin and a healthy pipeline. In addition, our investments to establish a footprint in the retail lower middle market space are starting to produce attractive results within the U.K. Property segment. To complement our profitable growth journey, we have continued investing in innovation, including those that extend beyond technology. For example, we're pleased by the early progress of access capacity solutions otherwise known as ACS.

Through ACS, we are tapping into our deep knowledge and experience with third-party capital, bringing innovation to the insurance platform of our company, serving both our open brokerage and delegated businesses. This includes leveraging our underwriting and portfolio management expertise to work in tandem with our strategic partners to develop structured portfolios at scale while producing new business and underwriting fee income as a new stream to access. While it is early days, several transactions have already been completed.

Stepping back and looking at the broader insurance market, we continue to see many micro markets influenced by a risk landscape that is being impacted by a number of dynamics, geopolitical tension, economic uncertainty, war, volatility in climate energy transition and technological disruption. Against this backdrop, the need for customized insurance solutions is as high as it's ever been. And as a specialist with a diverse product portfolio and robust global platform, AXIS is fit for purpose.

As noted, we're seeing varying market conditions across our different lines of business. In liability, overall rates were up 10% in the quarter with 6% growth. In U.S. Excess Casualty, we generated a 13% rate increase and 4% growth. In particular, our wholesale lower middle market segment continues to show favorable margin and sustained positive momentum. Within property, we grew our property book by 12% across our 8 underwriting units worldwide observing different degrees of competitive pressure. Our growth has been bolstered by our highly premium adequate lower middle market units, both in the U.S. and U.K. as well as by taking advantage of the innovation we brought to the market through ACS.

Pete will share more detail about property in his comments. In Professional, we grew 19% with a rate environment that's virtually flat. The majority of our growth was generated from transactional liability and our new and expanded E&O lines. which by way of example, includes Allied Health, miscellaneous E&O and enhancements to our design professional offering. As respect to management liability, we continue to produce solid growth within our private D&O business.

Importantly, the areas where we have grown continue to meet our risk-adjusted return expectations. Within Cyber, consistent with our prior observations, we are seeing an escalating risk landscape impacted by increasing ransomware attacks, and the environment is made worse by the potential of AI enabling more effective and sophisticated ransomware threats. This phenomenon coupled with increasing from competition from MGAs is placing downward pressure on price adequacy. Thus, we will continue to maintain a cautious and selective appetite and do not see cyber as a growth area for the foreseeable future unless a better risk-reward outcome is realized.

Moving to our reinsurance business. AXIS REIT has generated positive bottom line results for the last 8 consecutive quarters. This financial consistency has been grounded by a clear underwriting strategy centered around selective profitable growth and strong cycle management. In 2025, AXIS reproduced a strong combined ratio of 92.6%, underwriting income of $128 million. We produced $2.5 billion in gross written premiums, a low single-digit increase over the prior year period, consistent with prior indications. As respects the 1/1 renewals -- the market grew increasingly competitive, and we held our discipline across our casualty lines for the same reasons we've cited in the past, we maintain a cautious and highly selective stance in professional and liability and our caution has only escalated reflecting our view of a misalignment of risk and reward.

As we progress into 2026, AXIS focus is to continue to deliver bottom line performance. Before I close, I want to take a moment to extend my gratitude to our long time and long-serving CFO, Pete Vogt as this will be his last earnings call before he passes the baton to Matt Kurt. On behalf of all of his access colleagues, we're deeply appreciated to Pete for his years of leadership and important contributions to our multiyear transformation program. I, in particular, am indebted to his assistance during my initial transition as CEO of our great company.

In summary, 2025 was an outstanding year AXIS. We are pleased and motivated by the consistent progress and momentum we have achieved. We remain focused on continuing to pursue our specialty leadership ambition while delivering tailored insurance solutions to our customers and producing attractive returns for our shareholders. Finally, I want to extend my appreciation to our AXIS teammates worldwide for their many accomplishments and commitment to excellence.

With that, I'll now pass the floor to Pete for his comments.

Thank you, Vince, and good morning, everyone. AXIS had an excellent quarter and a phenomenal full year 2025. For the quarter, our net income available to common shareholders was $282 million or $3.67 per diluted common share. For the full year, $978 million or $12.35 per diluted common share, producing a 17% return on common equity. This drove our book value per diluted common share to $77.20 at December 31, an increase of 18% over the past 12 months and up nearly 24% when adjusted for dividends declared and share repurchases.

Our operating income was $250 million or $3.25 per diluted common share for the quarter or just over $1 billion or $12.92 per diluted common share for the full year, resulting in an operating ROE for the year of 18.1%. Let's look at the consolidated company underwriting highlights. Our gross premiums written of $2.2 billion were up 12% over the prior year quarter, driven by accelerating growth initiatives in Insurance. On a net basis, premiums were up 13%, and for the full year, gross premiums were $9.6 billion, up 7%.

Our quarterly combined ratio was an excellent 90.4%, consistent with an outstanding 89.8% for the full year. Cat losses in the quarter were just $30 million, producing a cat loss ratio of 2%. Cat losses were driven largely from Hurricane Melissa, which devastated Jamaica. Our full year cat loss ratio was 2.8%. We're pleased to see the benefits of the strategic actions we have executed over the past few years reduced the volatile impact of cats to our earnings.

We adhere to our philosophy of wanting to see sustained positive signals before releasing reserves. We recorded a release of $30 million with $23 million in insurance and $7 million in reinsurance in the quarter. We remain highly confident in our reserve position. And as is our normal practice at year-end, an independent third-party actuarial firm completed a review of our reserves and this provided us additional confidence in our reserve position. Our consolidated G&A ratio for the quarter, including corporate, was 13.9% versus 13.7% a year ago.

The increase is mainly driven by variable compensation and an increase in headcount in insurance as we have added new teams throughout the year. For the year, the ratio was 12.4% versus 12.6% in 2024. We continue to invest in new technology as part of our How We Work program and we expect our new hires and investments to drive growth and efficiency. I'd note that the benefit of our G&A ratio from Bermuda's substance-based tax credits were minimal. I would also note that underwriting fees from ILS partners were $14 million in the quarter and $54 million for the year and represent an attractive stream of fee-like earnings delivered from our ILS part Insurance had a strong all-around quarter and year.

Fourth quarter gross premiums written were $1.9 billion, an increase of 12% compared to the prior year quarter and $7.2 billion for the full year, up 9%. As Vince detailed in his by line market commentary, we're seeing a wide spectrum of distinct market cycles across insurance products. Our growth has been broad based across the portfolio as all classes of business grew, except for cyber. We are focused on the profitability and are pleased with the premium adequacy we continue to see across the portfolio.

I will note that specifically in property, a significant proportion of the 12% growth came from the build-out of our U.S. and U.K. lower middle market businesses as well as new business associated with ACS partnerships. As Vince noted, our property book is quite diverse across both geography and classes of risk. As we look to 2026, given the current insurance market conditions, we reiterate our confidence that we can grow gross written premiums at a mid- to high single-digit rate while maintaining premium adequacy at our long-term targets.

The insurance combined ratio for the quarter and the year were 86.5% and 86.1%, respectively, improved from 91.2% and 89.1% in the year-ago periods. We show remarkable stability in our [indiscernible] year loss ratios. For the quarter and the year, we were 52.5% and 52.4%, respectively, compared to $52.2 and 52.1% in the comparative period in 2024. This quarter, we saw an uptick in the loss ratio from the effect of rate and trend, which wasn't fully offset by mix. Our insurance expense ratios for the quarter and the year were 33.4% and 31.6%, respectively, versus 32.4% and 31.9% in the comparative period in 2024.

The increase in the quarter is driven by variable compensation for a very successful year in insurance and the investments we've made throughout the year in hiring teams as well as technology and operations. Our investments in operations have significantly reduced submission quoting and ingestion times, particularly as we employ AI tools, and we are still at the early days of implementation.

Turning to ReinsurancWe. Gross premiums were 13% in the quarter. I would stress that 4Q is seasonally our smallest quarter with only about 10% of the annual GWP generated in the fourth quarter. This quarter, a significant part of the growth was driven by a single large quota share U.K. motor transaction, which is renewable in Q1 2027 and therefore, will not repeat in 4Q 2026. We also saw new business and favorable adjustments in the credit and surety line of business. Full year gross premiums were up 3% and a better characterization of the year's trend. The reinsurance combined ratio was 93.9% in the quarter with an ex cat accident year loss ratio of 68% with no cats and a 1.9% benefit from reserve releases.

For the full year, combined ratio was 92.6%, with an ex-cat accident year loss ratio of 68.1%, including 2-point for cats and 1.5 point benefit from reserve releases. The quarters and years acquisition ratios were 23.1% and 22.2%, respectively, up from 21.8% and 22% in 2024, reflecting business mix changes. The increase in the G&A ratio for the quarter, up 4.7% from 4.0% a year ago, largely reflected higher variable compensation accruals.

For the full year, the ratio was 3.6%, flat versus 2024. Building upon Vince's comments about the January 1 renewals, we held true to our strategy of a bottom line focus with an emphasis on premium adequacy. We kept a cautious stance in reinsurance liability and professional lines. If we continue to see a challenging reinsurance market as we progress through 2026, we will remain bottom line focused. Our overall reinsurance gross premiums could be down in 2026, even up to double digits. However, while the volume may be reduced, we remain confident in the portfolio's expected underwriting profitability. We had a strong quarter and year for investment income. In the quarter, investment income was $187 million, and for the full year, investment income was $767 million, up 1% over the prior year.

This despite the impact of the LPT transaction, which closed in April. With increasing stability in our underwriting results, we have moved up marginally in our investment risk appetite, with a slightly increased exposure to below BBB rated bonds at year-end. We are now at the high end of our stated range of 15% to 20% of the portfolio designated for higher risk at 19%. Our effective tax rate in the quarter was 14% and included a $19 million nonoperating income benefit arising from an increase in our Bermuda ETA that was required due to an amendment to the Bermuda Corporate Income Tax Act. We expect an ongoing overall effective tax rate in the 19% to 20% range. We are in a very strong capital position, which enabled us to return substantial capital to shareholders this year through $139 million of dividends and $888 million of share repurchases. And we have a current authorization for another $112 million of share repurchases.

I would highlight that our priority for capital is to fund organic growth opportunities, which are accelerating in our specialty insurance business. I want to take a moment to acknowledge that this will be my last earnings call for AXIS. The company has gone through a lot of changes over the years, and I'm pleased to be able to step back when the company is better positioned than it has ever been before. both operationally and financially.

It has been a privilege to represent my AXIS colleagues to the public markets over the years, and I'm confident that Matt and the rest of the AXIS finance team will continue to serve you all well. Thank you, and we'd be happy to take your questions.

[Operator Instructions] The first question comes from Andrew Kligerman with TD Cohen.

Pete, great run. Congrats. And I guess the first question I'd like to touch on is the expense ratio. And so the underwriting-related general and administrative expense ratio came in for the year at 12.4%. And Make sure I'm right, please. I think the goal for 2026 would be 11%. So that's 140 basis points down. So that's the part of it. And the part of it is -- the overall expense ratio consolidated was 34.2%. Where does that go over time as well?

So thanks, Andrew. Thanks for your opening comment, too. This is Pete. I'll take that. And I'll break it into the 2 pieces when we think about it. The G&A ratio for the year and the quarter were impacted by variable compensation. And if I normalize, and I think that's a good way to look at it, -- for the year, the G&A ratio. Underwriting G&A would be 11.6%. And so there was a top-up there for variable comp. And in the quarter, it would have been $11.2 million I'd say both those metrics were on our glide path on our path to 11 as we were planning it from 2024 to 25% to 26%.

And I'd even say that we spent more money, as Vince indicated, in our IT and operations, getting more efficient in '25 by accelerating some spending there than we even thought we were going to do when we set our targets all the way back for the Investor Day in 2024. So we feel good about our glide path into 2026, and we're holding to our commitment of an 11% G&A ratio as we go into 2026. But I would say we'll always do everything in the best interest of the shareholder. And we look forward to actually being able to deliver on that promise. But that is the glide path we're going on. We feel really, really good about where we are, and we feel good going into 2026. I don't know, Vince, you want to...

I would. Thank you. Thank you, Peter. Good morning, Andrew. I think the other important point that perhaps adds the how to Pete's comments, is that we expect in the '26 year to realize the leverage of the various investments that we've made, Andrew. You'll recall that we mentioned in the third quarter, we had accelerated our investments in technology in all facets and forms. We hired a number of teams we reasonably expect in the operating year of 2026 to start to monetize those investments in efficiency, productivity and rationalized expenses in our operating model. There's a variety of shapes and forms that, that will show itself over the coming quarters, but we remain optimistic as we head towards end of 2026 and representing the goal that we had talked to accounting for, of course, normalized incentive compensation.

That was super helpful. And maybe shifting over to kind of the sustainability of margins as you grow. I mean, 12% net written constant currency on consolidated was really strong. And I think I heard mid- to high single-digit growth outlook for insurance and potentially even down double digit in reinsurance. So as you do this, do you feel comfortable with what was an accident year combined ratio ex cats consolidated? Very sustainable. Do you do closer to the $9.4 million or closer to the 86% that was for the full year. How should we kind of think about those combined on a consolidated basis?

So Andrew, this is Pete. I'll take that first. As we think about where we are in the quarter and then leading off into 2026. When we think about the various pieces, as I mentioned, we already talked about the G&A ratio. So I'll let that conversation go, but we feel really good about where we're going there. When we think about the cat loss ratios, as I've mentioned on the cat side, we really do expect full year cats to be in the 4% to 5% range. And so a really good year for us in cash this year, really good us handling the volatility that was out there.

But I think a normalized year would kind of be in that range. And then when we think about the attritional, we've been actually very much able, especially on the insurance side, as we've talked about, there's been some pressure on the attritional due to rate and trend, but we've been able to offset that by mix, and we've been able to do that all through 2025. As we go into I think there'll be some more pressure on rate and trend that we may not be able to completely offset by mix as we go into 2026. And that would be the 1 area where we see some pressure.

But again, I look at the all-in combined where if we see some uptick in the attritional loss ratio, as we talked about, we're working on bringing the G&A ratio down and so all-in combined around that 90% target is a pretty good number for the overall company. And Vince, do you want to come in over the top?

I think you're right, Pete. And I think you broke out the component parts of how we get there. But we entered the year are feeling very good about the portfolio in terms of the start point of premium adequacy. As Pete indicated in his prepared remarks, we acknowledge some of the intersection of rate trend and mix. We've done a really superb job at redesigning the underwriting portfolio. We're entering the year here at '26 with continued discipline around our cost structure.

I mentioned in your prior question, some of what will be revealing itself through the investments that we accelerated in the prior year. We've done a really good job in managing our catastrophe exposure. But I think ultimately, the range that Pete just expressed is in keeping with our own expectations.

That was great. If I could sneak one last quick one in. The reserves, you talked about favorable -- you talked about favorable development of $23 million in insurance as on $7 million in reinsurance. Anything you would break out on casualty that was unusual? And with Matt, I don't know if Matt is on the call, but has consistently expressed confidence in the reserves. I'm curious if Pete, you're going out feeling still confident and Matt, how you felt as you looked at the reserves coming in?

Andrew, it's Vince starting off. First, we feel very good about our reserve position for the company. Secondly, in the quarter, we followed the same philosophy that we articulated since our reserve Long-tail lines, as you know, and so there's no change in our philosophy of how we manage our reserve position. As it relates to the source of where it came, it did not come from long-tail lines, as you know. And I'll transfer to Pete now.

Yes. Thanks, Andrew. I guess what I would say is, again, the reserve releases really did come from short-tail lines. You'll see a few property on the insurance side as well as credit surety and then a little bit from agriculture, credit surety and A&H on the reinsurance side. And overall, I'd say when we think about the long-tail lines, there's always some little puts and takes across the accident years, and we'll see that when we have the triangles in the 10-K. However, there was nothing significant or material that would give us any pause concern. If there was, we would have taken some actions. So we feel good about all that.

And to your first question to me, as I sit here at the end, and I look at the balance sheet, I feel very confident and feel good about leaving the company in the great hands of Vince and Matt and the rest of the management team. and where the balance sheet stands both from a capital position and a reserve position.

And with that, I'll pass it to Matt.

And great to be here and speak to you all. I would just reiterate, I've been here for 3 months in a very well banned out transition plan. Much of that time has been spent working with the reserving team working with Pete. And overall, I'm quite comfortable with where the reserving is right now. And I agree with what Pete at, we have a strong balance sheet and a strong capital position.

Next question comes from Yaron Kinar with Mizuho.

And before my questions, Pete, I just wanted to wish you well as you embark into retirement. I guess going back to the expense ratio. So I understand this quarter part of the increase in the expense ratio is variable comp, which I think was also true as were in the year and obviously, it's a good problem to have because you have strong performance. But as you expect to build momentum, isn't that going to remain a headwind in the future in '26 and beyond?

Yes. As we think about going forward, the annual targets that we use are reflective of what we think the environment is your own. So in the year, we had a great year across a number of dimensions. But as we look forward, we're constantly adjusting our annual plans, and that moves our targets a bit. So I do hope it will always be a headwind. And I think as a headwind. If we have some variable comp because we've performed tremendously great for the shareholders in a particular 12-month period if we have to put up some variable comp due to that.

If we go above 11% because that's the reason, I think that would be, I'll call it, agreeable to the shareholders given that it would be good financial performance that they'd be receiving.

And Yaron, this is Vince. Welcome back. It's good to hear your voice. Please don't underestimate the leverage that I pointed to in Andrew's question inside the operating model. The number of persons that will be required to execute our financial plan the increased productivity from the resources and the numerous teams that we brought into the organization, the reshaping of our general cost structure that extend beyond personnel costs, the increased fee income that's resulting from our various sources of underwriting fee income, both in our reinsurance and more recent in our insurance business, the mix shift that has dramatically taken full with respect to the insurance versus reinsurance contribution and the continued portfolio reshaping going on in that business.

Will it be an earnest effort? Everything has been earned at AXIS. We've been leading quite a bit of a transformation. We're focused on the objectives that we set forth. If we ever, of course, correct, we'll certainly announce you, but we are focused on our 11% in the manner that we described. And we feel very good, again, about the ability to monetize the numerous investments that we took in our operating platform, which has had a bearing certainly in our GA ratio in the reported results of year-end 2025.

Just to confirm, though, on the expense ratio, we are also seeing, I think, a lot of talent movement right now, and I think there's also maybe a bit of an increase in what talent is being paid right now. I just want to confirm, if you see the opportunity to grow in a geography or a line by investing more in personnel be willing to jump on that, even if it means that the 11% target may be delayed by a bit, even with the leverage and the other efficiencies that you mentioned?

Yes.

Okay. And 1 final quick one. The combined ratio, Pete, you said that you still feel comfortable with the 90% that is reported, right, not underlying?

You look at the fourth quarter at 90.4%, as we look going forward into 2026, somewhere in that range is what we would expect given the puts and takes that we'll have as we go into the year, but still comfortable in that range.

The next question comes from [indiscernible] with Wells Fargo.

Going to the high single digit -- mid- to high single-digit growth guide for insurance. Can you maybe just give a little bit more color on the paths to getting there, just given maybe you could provide some assumptions on the rate environment as well as the expected growth uplift from some of your new and improved product offerings? And then just sticking with that, any early insights into how the Racker vehicle is performing? And did that have any growth impact in the quarter?

I'll start out and then Pete will come over the top. So as I mentioned in the third quarter, our insurance business enters 2026 without any material reshaping going on. Obviously, as a specialist will always have pruning. Additionally, we indicated that we entered this year with a premium adequate portfolio. We have further leaned into our new and expanded lines, which we've been talking about now for the last couple of quarters and continue to realize material inroads.

In fact, if you were to look at the growth in insurance segment in the fourth quarter discrete, about $150-odd million of our growth came from the new and expanded classes -- we view these classes in the aggregate as premium adequate and what they've done for AXIS is create new revenue streams in terms of products, forms of distribution and customer segmentation. We have optimism around the runway that exists to continue executing the growth that we have produced in keeping with the range of estimates that Pete mentioned. As it relates to Pete, I'll ask that you come over the top in terms of the contribution, but it was not a substantial volume contributor in the fourth quarter...

This was the first quarter we booked any gross written premiums to ACS in the quarter. it came in just around $20 million for insurance, very little net earned in the quarter, quite frankly, because it's going to earn over a long period of time. So it's just getting started. And again, we expect, as we've talked about in the last call, when you think about the Rack Re deal, you'll see most of the written come in over '26 and '27 and '28 because of the way that deal is structured. And again, the net earned is going to come in over '26, '27, '28 and '29 because of how that's going to earn. So it's a really good deal. We're excited about it, and it's just started in this fourth quarter.

Got it. And then for my follow-up, just switching to paid and incurred trends. They were a bit better sequentially, and they did improve year-over-year when you adjust for cats. But it is still a bit elevated in the low 90s. And I know previously, you pointed out business mix, but can you maybe provide some more color of like what we should expect to see going forward as we continue to see that mix shift? And any other drivers that could potentially improve those metrics?

Christian, consistent with what we've indicated in the past, we've had -- as a company in the midst of a underwriting transformation, there's been a substantial set of changes related to both what you pointed out on the mix. Our claims organization has had substantial investment in resources, capabilities. We've had some acceleration with respect to large payment claims. We look at this indication really in combination with many other in and of itself. It's really not just positive of anything that is alarming to us.

We feel very good confidence around our reserve position. We did have, as you indicated, a decrease in the outcome of that ratio -- and even if you were to compare the prior year same quarter discrete, it's explainable by catastrophe losses in 2020 for, we paid out, I believe, $80-odd million, and so you see the material difference here in 4Q 2025. And so we are attentive to this issue. We are not dismissive about it. We place it in a broader context. And from our judgment, we're pleased with how we're managing the overall outcome of our underwriting results, resolve we have in our reserve position and the continued integration of our underwriting model that takes together the insights of our claims organization, our actuarial function and underwriting, making certain that we are observant to our bottom line aspiration as possible.

Got it. And if I could just sneak 1 more. On the G&A, is it safe to assume -- I mean, obviously, it sounds like you will do opportunistic hiring if it arises. But -- is it safe to assume that we should have a more normalized, I guess, hiring pattern in '26 versus '25? Because it sounds like there was a lot of upfront investments on some of these new underwriting teams. Is that a safe assumption?

I think we want to reserve the right to remain very strategic in how we go about hiring teams. We have some scheduled for the 2026 year. I don't really want to reveal how many or in what lines of business. But suffice to say, my business leaders are certainly active AXIS' brand is sought after and we're going to use great discretion and making certain that we can optimize the productivity, enhance the alignment to our distribution strategy, that has worked substantially well for our organization and make certain that it's aligned to our overall underwriting strategy.

The next question comes from Meyer Shields with KBW.

This [indiscernible] My first question is on growth. You've mentioned like low middle market growth throughout the 2025, which significantly contribute to the property growth in Q2. Can you add more details of what is driving the sustained momentum and also, could you update us on the competitive landscape there?

Yes. The lower middle market continues to be for AXIS, a dedicated and new customer segment that we've been pursuing for the last couple of years. Kindly recall that we brought in chief most of our product set from our wholesale division, including our professional liability classes. We've been executing a strategy that has been both wholesale and retail distribution source. We're pleased with the continued proposition development that our North American team has created, bringing customized solutions to this customer segment that has varied meaning in definition, but in the aggregate, is really a transaction risk profile, a lower complex risk profile.

We're pleased with the sustained growth. The runway remains fairly long and the competition, of course, it exists as a known customer segment that has good margin. It has the potential to be sticky. But we're pleased with what the channel that we're going through, the partnerships that we have formed the product design. And finally and critically importantly, the investments that we've taken in technology to enable a heightened pace of straight-through processing, enhanced quoting productivity, both by individuals and therefore, in the aggregate, we're pleased with the momentum, and we do not see any reason why we cannot sustain the growth in this segment. And the submission volume in this area of our company is just substantial. It's just substantial.

That's very helpful. My second question will be on the core loss ratio. I know you mentioned the pickup because of rate and trend isn't fully aligned. Could you like unpack where you're seeing the last rooms running ahead of pricing?

I would say -- this is Pete. I'll come in. I'll ask Vince to then come over the top. But I'd say where we're seeing probably the most significant pricing would be in some of our property books where E&S property and global property specifically in London, we've had some that's where the pricing pressure is probably most acute. I'd say the 1 thing we're really happy about would be on the long tail lines. We continue to see rate in excess of trend. That's given us some confidence in there. And I think that's why Vince is currently and always characterize the current market as kind of a changing market, not necessarily a soft market because of the different puts and takes.

Yes, Pete. I think that that's right. We continue to have strong observation management control over the long tail lines where we have acute watchfulness around trend. We continue to leverage our short tail versus long-tail portfolio composition which has obviously different trend assumptions. We have a vigilant accounting of trend clearly with our actuaries, our claims organization, our underwriting organization, -- and as you know, over the last several years, this portfolio has shifted increasingly toward our short-tail lines. And finally, within the new and expanded classes, you'll recall, we estimated some 60-odd percent of our new and expanded classes were coming from the short-tail lines. And so that's how we would respond to you. Thank you for your question.

The next question comes from Josh Shanker with BOA.

Yes. I'd circled the Pete bandwagon, you're a real 1 man, so I appreciate it.

All right. So a tough question time. third-party underwriting or outside a range from partners. How big do you expect it to get as a percentage of the whole in 2026 and you can know wherever you want, but in terms of the way you segment the business by class, what percentages will see the biggest surge or, I should say, biggest percentage coming from third-party underwriters. And if you could compare the expense and acquisition ratios of third-party business versus in-house business that would be...

Josh, and let me try and unpack your question, your use of third-party underwriting. Okay. So with respect to what we call delegated, let me provide some context and I'll try and address each of the elements of your question directly and hopefully responsibly. So firstly, at the end of 2025 delegated across our insurance platform represent approximately 32% of the volume of what we produced in the company. Importantly, there are 4 delegated relationships that have substantial contribution to that 32%.

We've spoken about these areas in prior calls. They involve, of course, our pet delegated relationship, our surety delegated relationship our transactional liability book, which is an increasing focus, of course, in this changing risk landscape and Finally, our portfolio solutions group out of London, where we are a so-called smart follow market, and you know the Lexicon in London, that is a term of art.

Third, with respect to the difference in acquisition costs, I can tell you that they're contemplated in our overall estimates, they're approximately -- it's difficult because of the profit sharing agreements to give it a fine point. I'll ask Pete to help me on that. And then finally, in terms of sizing, I don't think that the delegated book will become smaller for access, I think staying in the 30-odd range.

Please note in the North American component, it is only 14% of our total volume and distribution delegated. And as you would reasonably expect from a London Lloyd's market, we have a substantial percentage of our business coming from a variety of forms of delegated. Hopefully, that answers your question.

Nothing short of an excellent answer. And in terms of looking forward into '26, '27, '28 beyond, are you thinking the industry is changing in a way that delegated underwriting is going to be an increasingly large proportion of the portfolio? Or is this a soft market strategy that will invert in 2029 when the markets change?

If I have this approximately right, it was great. But look, instinctively, there is structural change that has gone on in the delegated space. And in particular, if you look at the order of investment that has been made within our strongest set of partnerships, U.S. wholesale distribution, a considerable investment has been made in the MGU entities within those organizations. I think that has staying power I do think that there'll be a consolidation of lines of business changes that will emerge.

I can't be perfectly prescriptive about which lines of business driven MGAs are going to fold. I would point to the environment that we're competing in is quite different than 3 years ago with respect to margin. And the underwriting acumen that has to be shown by these entities will be critically under examinations.

I think, particularly those that are private equity owned. I do think in contrast, the wholesale dedicated MGUs have staying power. As you'll recall, Josh, when Pete and I executed the reserve charge, we redefined the role in purpose of MGA's and delegated authority inside our organization. It was a painful lessons that we had to take. We're very pleased with what Mike and Sarah have done in executing the change in our underwriting strategy.

We're more concerned about the controls that we have in place which has resulted from substantial investment in data and analytics and more importantly, the economic alignment of interest that we've created through the profit sharing agreements where we [indiscernible], in particular, if you just go back to the notes that we conveyed, it shows convincingly how we have changed the dynamic of how we interact in the MGU arena. I'll leave it there. If there's any further questions, we're happy to take it.

The next question comes from Andrew Anderson with Jefferies.

Pete, I think last quarter, you were saying within the Insurance segment, Rack Re could push growth into double digits, but now you're kind of pointing to mid- to high single digits. So is there kind of a change in expectation on either organic growth or on Rackery into next year?

You know what, Andy, I am very consistent with what I said in the third quarter. Yes. I think Vince came in over the top of there. But high single digits would be excluding Rackery as we look at 2026. Rackery, given what our expectations are, would push the insurance into the double digits.

Okay. And then on reinsurance, kind of pointing to the potential for double-digit down, I suppose, on a gross basis. I do think maybe half of that agent, 40% to 50% is what could be short tail or specialty lines? Is that kind of more of a flattish expectation there? Or could we break apart the casualty and specialty within reinsurance, how you're thinking about that?

This is Vince. If you want to talk about the portfolio construct, you should reasonably expect in the long tail lines for us to continue the reshaping that we've been talking about these past couple of years. a continued focus within our specialty lines. There's a variety of makeup between and among our definition of specialty reinsurance lines as respects short tail or longer tail than not long tail. But the bumper sticker that I hope you take is while volume may be less than year-end 2025.

We feel very good about the margin contribution of underwriting profitability that will be generated from our reinsurance business and we continue to see a substantial alignment between the reward of our distribution partners and the capability set of our specialist reinsurance teammates. And so I'll leave it there.

The next question comes from Charlie Lederer with BMO.

Congrats, Pete, and best of luck to you. I look forward to getting to work with you, Matt. Maybe just going back to Christian's question on the attritional loss ratio on insurance. I appreciate the new and expanded classes are rate adequate I guess when we think about the increasing contribution from professional liability and the rates of [indiscernible] property, can you just talk about how that mix shift should impact the attritional loss ratio in those 2 -- from those 2 lines as we progress through '26?

Look, I don't know if I'll answer it in the lens that you raise it, but I'll give you, I think, a more helpful answer to the broader part that I take from your question. Firstly, the growth in professional was substantially driven by transactional liability and our new and expanded banded E&O classes with some complement of contribution from a design professional business. Second, we've constructed a portfolio that has leveraged, of course, a lot of growth expectancy from the new and expanded. And if you look at the last couple of quarters, you'd certainly have a consistent proof point.

We've introduced a capability in the form of access capacity solutions that is really addressing unique needs from our customers and utilizing third-party capital. When you put in context Pete's remarks around the headwinds, obviously, the pressure on our ex cat attritional, that's come to us, excuse me, ex-cat attritional loss ratio will be shown in the '26 year. We don't think it's in an outsized manner.

If it's about a point, that would be in keeping with what I would reasonably expect with the information we have today, but it's certainly not something that's going to materially move. The influence of a short-tail portfolio a balanced approach in our long tail lines gives us confidence in the overall outcome of our loss ratio performance. Pete, I don't know if you want to come over to top of anything of....

Yes, I think you kind of hit it there, Vince. We've had actually a real benefit of mix change this year. As we go into next year, depending upon where the markets go, we may not get the exact same benefits that we've been getting on mix. And so we do think that -- I think Vince said it right, somewhere around a point would be an expectation on the insurance side.

And you mentioned the prioritization of organic growth over buybacks in your prepared remarks. Obviously, I appreciate that buybacks were a little bit elevated this year. Just wondering I guess if you get an average cat year and you hit your top line targets, how we should think about the capital return profile for an access just given the mix shift and the evolution?

Yes. This is Pete. Again, we're going to continue to be opportunistic with the share buyback. We do still believe at our current more price were undervalued, and so we did a fair amount of share buyback in the fourth quarter. But our #1, as we said in our prepared remarks, is organic growth. And with the opportunities we have in front of us with who we've been dealing on, we think we'll have good opportunities for growth in this year in our insurance specialty side.

And then based upon the earnings profile that we have, we'll look to put capital to you still continuing to build out our data and analytics and our platforms. But then we'll look to share buyback in an opportunistic manner. I wouldn't give a specific number per quarter or anything like that.

The next question comes from Rowland Mayor with RBC Capital Markets.

And I need to be faster on the STAR 1. I wanted to quickly ask on the reinsurance growth. I assume that that's down up to 10% or down double digits includes the motor renewal? And am I thinking about it correctly that effectively renewed twice in 2025?

It did not renew twice in 2025. So it's a good question. It was a brand-new product really that we did in the fourth quarter. It just happens to be, I'll call it, a 15-month product. And so it's going to come up for renewal in the first quarter of 27%. That does have a bit of an impact because it was a large quota share, but I think our comments are more around our feeling about where the current market is in the long-tail lines, the casualty lines, especially in reinsurance and how we're seeing the market dynamics play out there. I don't know, Vince, if you want to add anything else?

I think you answered.

Yes. And then I guess on the next 1 going back to Charlie's question on the buyback. 2025 was just -- it was very lumpy with all the Stone Point deals. Is the right way to think about it should be a bit smoother next year. And I mean, the payout ratio this year was 100%. I assume it that won't happen again, there's some elevation because of just the Stone Point opportunity?

Yes, this is Pete. I'll come in over the top on that. One of the things that did elevate the payout ratio in the year was, remember, we did the NSTAR LPT transaction, which actually gave us a real benefit to our capital position in the year and allowed us to do what I would call more share buyback as a percent of income than we would normally see in a normal year. I would say it was a bit lumpy in 2025. Again, that was the opportunistic nature of our share buyback.

So I still would say that we're going to be opportunistic through 26, could be lumpy depending upon what we see happening in the markets as well as our needs for growth.

There is a follow-up question from Yaron Kinar with Mizuho.

Back for more. just maybe pounding a little more on this capital deployment issue. Your premium surplus is still below 1. You are growing, but with the growth targets you're offering and the lines of business in which you're growing, I think are probably a bit more capital light. You've moved away from cat exposures, like why -- is it reasonable to think of the payout ratio sustaining above, call it, the 60% range even when you're growing?

So Yaron, this is Pete. I would say if you're looking at a payout ratio that high, that would be including what is a very good common dividend. I would say that looks like it sounds high side to me. So I would have if you're thinking about modeling, I would be modeling below that number.

Yes. And I think the assumption on some of the capital use in certain of our specialty lines is perhaps larger than your thing is accounting for, but I think that's an important point. We can talk further about it, but...

This concludes our question-and-answer session. I would like to turn the conference back over to Vince Tizzio, CEO, for any closing remarks.

Thank you for joining today's call. As we look to the future, we believe AXIS is very well positioned in the marketplace and poised to continue to build on its positive momentum. We look forward to updating you on our continued progress in future quarters. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the AXIS Capital Third Quarter 2025 Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Clifford Gallant, Head of Investor Relations and Corporate Development. Please go ahead, sir.

Thank you. Good morning, and welcome to our third quarter 2025 conference call. Our earnings press release and financial supplement were issued last night. If you would like copies, please visit the Investor Information section of our website at axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast on our website. Joining me on today's call are Vincent Tizzio, our President and CEO; and Peter Vogt, our CFO.

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 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 the 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, our non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement. And with that, I'll turn the call over to Vince.

Thank you, Cliff. Good morning, and thank you for joining our call. In the third quarter, our team once again delivered excellent results as the momentum in our performance further accelerated. The transformation we have undertaken has now demonstrated sustained profitable growth underpinned by an enhanced operating platform with new capabilities, products and a highly focused team.

In the quarter, we delivered a 14% year-over-year increase in diluted book value per common share at $7,382, 18% annualized operating return on equity, a 20% increase in operating earnings per share over the prior year quarter at $3.25. Premiums of $2.1 billion, our highest third quarter ever up nearly 10% over the prior year, including $670 million in new business. And finally, a combined ratio of 89.4%. We are achieving these results in a changing risk landscape with many different micro markets at play. Our strategy positions us well to compete in this environment. Premium adequacy across our aggregated portfolio is solid. We are actively cycle managing and leaning in where it is prudent.

The investments we're making in people, products and platforms are creating value. Indeed, the further acceleration of our premium growth in insurance is bolstered by our new and expanded lines of business. Additionally, we continue to draw upon third-party capital partnerships while bringing innovative product capabilities to meet the diverse needs of our distribution partners. By example, we launched AXIS capacity solutions, which during the quarter, transacted its first deal, a partnership with Ryan Specialty. Through our how-we-work program, we are continuing to strengthen all aspects of our operations and how we go to market. In the quarter, we made continued strides in modernizing our underwriting platform while leveraging emerging technologies and AI to drive efficiency, improve decision-making and support scalable growth.

I'll share several examples. We've implemented a highly modern application platform across all business units and functions with very little legacy technology that is improving speed to market, heightening accuracy and reducing manual effort and cost. We are presently applying AI solutions in all forms, custom and package within applications, on user desktops and in all cases, driving productivity increases. We've deployed the first release of our next-generation underwriting platform in North America, advancing how we ingest, route and review submissions while enhancing our overall efficiency. These advancements reflect the pledge that we made at our Investor Day to invest $100 million into our operational infrastructure. Capitalizing on our excess capital position, we have been accelerating and expanding these efforts, particularly in supporting our new business lines. We see these investments as a key to advancing our profitable growth ambition.

We are also deepening our relationship with our distribution partners in a broker survey conducted this year, our customers recognize access with top-quartile Net Promoter Scores while distinguishing our company for its specialty leadership and ranking us ahead of the market for our underwriting knowledge and solutions-oriented approach. None of these results can be achieved without a highly engaged and disciplined team. The AXIS culture we've developed and deep commitment of our people is exciting and enabling our progress.

During the quarter, we have added talent to our underwriting teams throughout the globe. And on the corporate side, we notably announced Matt Kirk as our future CFO, succeeding Pete.

Let's now dig deeper into our segment results. We'll start with Insurance. Our Insurance segment again delivered an outstanding quarter, highlighted by record third quarter premium production of $1.7 billion, or 11% over the prior period, new premium written of 570 million, a current accident year ex-cat combined ratio of 83.3 and and record underwriting income of $153 million, up 55% over the prior year.

In North America, we produced stellar results with premiums up 12% and submission volume up 18% in the quarter as we continued to capitalize on the investments we've made in expanding our product offerings and in enhancing our underwriting platforms yielding greater efficiency gains. Our lower middle market strategy is generating sustained acceleration and strength in value. In our Global Markets division, results were strong and premiums were up 9%. In the quarter, our growth came from lead product positions in the London market, notably marine, energy and construction. Importantly, these classes remain premium adequate and have a robust pipeline.

With respect to broader market conditions within insurance, we continue to observe an evolving risk environment. But overall, the competitive landscape is disciplined. Let's unpack this further for AXIS. In liability, rates were up 10% in the quarter with 8% growth. We generated a 12% rate increase and 11% growth within our U.S. excess casualty business. Within this business, we continue to lean into the highly premium adequate wholesale lower middle market segment. Our casualty portfolio is well managed and within wholesale distribution, our excess casualty unit is recognized for its thought leadership and disciplined underwriting.

As respect to property, we grew our property book 8% with rate changes varying widely across our many classes. Illustrating this, we see greater competition in large account E&S business but are still observing rate increases in small account business in our international book. We serve customers through 8 property underwriting units across the world, which are all seeing different degrees of competition and we benefit from the diversity of our customer segmentation in these units. An increasing contributor is our lower middle market property unit, which evidenced continued growth in the quarter. Our property underwriting strategy remains disciplined and enjoys premium adequacy and average net limit in the low single digits, a well-balanced parallel and geographic mix and is backed by a [ CAT XOL ] protection that attaches at $100 million per event.

In Professional, we grew 18%. The majority of our growth came from transactional liability and E&O. We are encouraged by the increasing contributions that we are continuing to see from our new and enhanced product offerings, including design professional, Allied Health and Environmental. As respect to management liability, we continue to drive reasonable growth within our private D&O business. As respect public D&O, consistent with the last quarter comments, we continue to observe that pricing is flattening out. Within cyber, we observed industry ransomware attacks as increasing, but thus far not being reflected in our claim counts. That said, we are seeing the increased competition of MGAs and surplus capacity have placed unwarranted downward pressure in pricing dynamics. We have maintained our underwriting discipline which is reflected in our selective approach in the quarter.

In addition, we have now completed the reshaping of our delegated cyber book. We are strengthening our capabilities in our cyber risk advisory services which help policyholders increase their organizational preparedness and resilience. We are focused on strengthening our SME presence globally and notably in the United States through our partnership with Elpha Secure. As respects to our reinsurance business, we continue to generate strong bottom line performance with our seventh straight quarter of consistent profitability. Our reinsurance underwriting strategy remains highly disciplined and focused on select specialty lines.

In the quarter, we produced 6% premium growth. Specialty short-tail lines contributed 91% of our new business premiums, a combined ratio of 92% and underwriting income of $35 million. Reflective of our disciplined approach, we are increasingly vigilant in navigating liability and professional lines. Consistent with past comments, we generally do not view seating commissions nor the rate environment for these lines, particularly in North America to be in keeping with our return expectations. Taken together, this was another strong quarter for AXIS. Across the micro markets of specialty insurance and reinsurance, we see an increasing need for tailored risk solutions. Thus, we see AXIS as a very well positioned to support our customers and importantly, our distribution partners, while at the same time, rewarding our shareholders with sustained and attractive returns.

We are building on our momentum we are leveraging our capital position, the talent of our team and the support of our distribution partners to lean into our new and expanded lines as well as identifying new avenues to drive profitable growth. We are investing in our infrastructure and operations, embracing technology and AI. We're excited for our future, and we believe the best is yet ahead for AXIS. And with that now, I'll pass the floor to Pete for his comments.

Thank you, Vince, and good morning, everyone. AXIS had another excellent quarter. Our net income available to common shareholders was $294 million, or $3.74 per diluted common share. And our operating income was $255 million or $3.25 per diluted common share, producing a 17.8% annualized operating return on common equity. This drove our book value per diluted common share to $73.82 at September 30, an increase of 14.2% over the past 12 months and up 16.9% when adjusted for dividends declared.

I'll start with consolidated company underwriting highlights. Our gross premiums written of $2.1 billion were up 9.7% over the prior year quarter, driven by accelerating growth initiatives in Insurance. On a net basis, premiums were up 9.5%. Our combined ratio was an excellent 89.4%, and our accident year loss ratio ex cat and weather was 56.3%. The cat losses were just $44 million, producing a cat loss ratio of 3%. Cat losses were driven by a combination of a $24 million impact primarily from severe convective storms in the United States and $20 million of losses related to the Middle East conflicts, which hit our marine and terrorism lines.

We adhere to our philosophy of wanting to see sustained, positive signals before releasing reserves. And we recorded a release of $19 million with $15 million in insurance and $4 million in reinsurance in the quarter. We continue to believe we are strongly reserved, and we rely upon a great deal of data and analysis to reach our conclusion. For example, from a high level, statistics like IBNR and total reserves are holding steady, continuing to give us confidence.

Our consolidated G&A ratio, including corporate, was 11.7%, down from 12.1% a year ago. We continue to execute on our how-we-work program, including investing in our business, with new technology and adding underwriting teams. The investments we're making give us increased confidence that we will manage costs, grow the premium base and hit our full year 2026 target of an 11% G&A ratio.

Now let's move on and discuss our segment results in more detail. Insurance had a strong quarter. Gross premiums written were $1.7 billion, a record third quarter for insurance and an increase of 11% compared to the prior year quarter. The strongest driver has been the continued momentum of our new and expanded initiatives. These initiatives contributed nearly 70% of the growth in the quarter. The growth was broad-based across the portfolio as all classes of business grew, except for cyber.

In property, where we grew 8%, North America E&S grew 12.5% as our lower middle market initiative continues to grow, and we continue to attract new business at rates above our long-term target returns, even in the midst of the changing market landscape. Pro lines, as Vince mentioned, we had 18% growth and I would reiterate that the growth was driven by a number of new and expanded products. Growth in A&H continues to be driven by our pet product and in credit and political risk the new surety initiative continues to grow. In cyber, as Vince noted, market dynamics remain a challenge. Therefore, excluding the remediation work, which we completed this quarter, the rest of the portfolio was essentially flat year-over-year.

Net written premiums were up 11%, and as we've signaled, we're keeping a little bit more of our well-priced portfolio. In insurance, we are gaining momentum from our recent growth initiatives. As we sit here today, we believe that going into next year, we will be able to construct a portfolio that remains premium adequate. And that can grow at a mid- to high single-digit growth rate, excluding any impact from new side cars such as RAC Re. But a lot of that depends on what happens in the shifting landscape and as always, our priority is underwriting profitability. With respect to RAC Re we are excited about the new vehicle, which builds upon our strong relationship with Ryan Specialty. We expect to retain about 1/3 of the gross premiums written generated by the facility, which we expect to produce strong combined ratio business.

In addition, we will earn fees on ceded earned premiums. The total volume will be a function of the growth rates of the underlying underwriting entities. And I would stress that this transaction is done on an underwriting year basis, which means a slow buildup of revenues in 2026. The insurance combined ratio was an outstanding 85.9%. The quarter included 3.9 points of cat and weather-related losses and 1.3 points of reserve releases from short-tail lines.

Now let's move on to the Reinsurance segment, where the business has continued to deliver stable, consistent and strong profitability. We grew 6% as we found opportunities to grow in credit surety lines as well as the agriculture business. In liability, we continue to be cautious, but this quarter benefited from a higher level of positive premium adjustments versus the prior year. The reinsurance combined ratio was 92.2% with an ex-cat accident year loss ratio of 67.9%. Cats were just 0.3 point with just over 1 point of benefit from the reserve releases. As we have done all year, we are taking a cautious stance to booking our reinsurance loss ratio while continuing to deliver consistent profitability. We had a very good quarter for investment income at $185 million. Our outlook for investment income remains favorable as we continue to generate excellent operating cash flow, which was $674 million in the quarter, and is driving growth in our asset base with a market yield of 4.8% is above our 4.6% book yield as of September 30. Our effective tax rate of 18.9% in the quarter reflects the geographic mix of our profits as we continue to generate outstanding results in our U.S. operations. We remain in a very strong capital position. We have returned substantial capital to our shareholders this year as we have completed $600 million of share repurchases and declared $105 million in common dividends. And we recently passed a new repurchase authorization for $400 million.

I would reiterate that our priority use for capital is to fund profitable growth and to invest in the business. Our excellent financial results continue to demonstrate the hard work and commitment of our team to make us the leading specialty insurer in the world. We're tremendously excited for the future.

And with that, operator, we'd be happy to take questions.

[Operator Instructions] And our first question today will come from Andrew Kligerman with TD Cowen.

I guess the first question would be around the really nice growth in property. And Vincent, Pete, you gave really good color on how it broke down notably North American E&S up 12.5% and then overall, up 8%. But I was kind of interested you mentioned it's hitting your long-term targeted returns. So if I look at the loss ratio, and I don't know how you would kind of put in a cat load, but we all know pricing is coming down. So how does the combined ratio or loss ratio, whichever way you want to look at it, line up with where you're coming in presently because I'm kind of curious as to how that's going to trend as you grow the business. And it sounds like it's a great opportunity and lower middle market I'm hearing really good things.

Yes. Andrew, this is Vince. I'll start, and then Pete will come over the top. Please allow me as well to express on behalf of AXIS to all those in the path of Hurricane Melissa, our best wishes and speedy recovery as we are watching that, obviously, with good care. But direct to your question, we had 8-odd percent growth in our property line in the quarter. As you indicate, Pete and I detailed, it's important to play some context around this growth. First, we're letting you know that this growth in our judgment comes from an extremely solid starting point of premium adequacy.

Second, a well-constructed portfolio with respect to limit apparel mix. Importantly, in our insurance business, 40-odd percent of our property business is noncritical cat and our lower middle market growth was exceptional in the quarter. All of these have a different gearing effect against what you point to on the rate change, which in and of itself, really doesn't address the start point of our premium adequacy. As you know, we've been working very hard over the past several years at reducing the cat profile of our company generally and within insurance, I think that we've shown that ability.

And so taken together, that is exactly how we're able to produce the kind of results that we are. I'll finally note that recall please that we go to market in property through 8 different entities around the world, and we're attracting different customer segmentations, industry groupings and obviously, geographic dispersion. And so we feel great confidence in the integrated approach that we're taking with our actuarial team, our claims team and certainly our underwriting leadership principally led with Mike and Sara in our insurance business where this growth is occurring.

Pete, I don't know if you want to add to that.

Yes. Very much appreciate the color on property. And I think that gets to your question there, Andrew. I think also inherent in your question is as you're looking at the insurance loss ratio of 52.3. And how is that kind of staying nice and consistent given what is some pricing pressure out there. I think what I would note is Vince has said this many times, we necessarily can't control the market, but we can control mix.

Underlying that, I would say we've seen our underwriting loss ratios by our lines of business and business classes. Actually, we've actually shown the effect of rate and trend there where we've seen some increase in the underlying loss ratios but that has actually been offset by mix. And if I look year-to-date, especially year-over-year, we've got a higher proportion of the short-tail lines of business, which tend to have a smaller lower loss ratio. So Underlying, we are reflecting rate and trend in what we're seeing in the markets in our underlying classes of business and the loss ratio. But the mix of business has changed such that that's kind of offsetting the pressure we've seen. And that has allowed the loss ratio in the ex-cat loss ratio in insurance to stay very consistent.

Great. And then maybe shifting over to third-party capital access capacity solutions that the first deal with seem very exciting, very promising. Could you talk a little bit about the potential for more deals like that? Are you looking at a lot of them? Is there a pipeline out there that you're seeing?

Yes. Andrew, I'll start. This is Vince again. Thank you for your question. AXIS Capacity Solutions we formed earlier this year, really in recognition of an emerging trend that we've observed in wholesale distribution relating to cross-class, cross geographic opportunities. And in the case of Ryan Specialty and specifically RAC Re, this was an illustrated example where AXIS participated on about 1/3 of the MGUs within the Ryan Specialty Organization. We had the opportunity to curate and participate on the select remaining MGUs that come to market from that very strong partner of ours. We agreed to do so with some careful deliberation around the portfolio makeup, the underwriting terms and conditions.

At the same time, we assisted in the facilitation of a sidecar with the strength and belief on the prior comments we've made in any instance relating to delegated to work as hard as we can to align economic interest. We believe that the sidecar was a perfect example wherein AXIS receives a fee from the sidecar and the profitability trigger for Ryan Specialty is only satisfied after the profitability of the underlying business is met. And so we thought this was an appropriate transaction for us to lean into an existing channel of distribution that we have, a recognition of the underlying portfolio, an alignment of economic interest and ability to have our hand in the claims control of the underlying business and to ensure that we have transparency in the information.

As it relates to the second part of your question, this transaction has no doubt spawned increasing interest from a variety of partners around the world. And yes, there is a pipeline and critically important to Pete and myself, is that we maintain the underwriting adherence from the lessons we learned in our own reserve charge relating to the delegated book that we had back in December of '23. We are leaning into the principles that we've previously outlined for when we engage in delegated underwriting authority and most importantly, we have satisfied ourselves on the alignment of interest, which is critically, critically important to us.

Next question will come from Elyse Greenspan with Wells Fargo.

My first question, I wanted to go back to go to, I guess, the insurance world comments. Pete, I think you said mid- to high single-digit growth, like excluding sidecars like RAC Re. I believe RAC Re could add like $150 million on a net basis. So does that mean if we kind of lump that in there that next year could get to double digits? I'm just trying to bring all the guidance together for the Insurance segment.

Yes, Elyse, thanks for the question. And I specifically bifurcated the 2 because of exactly that. So I do think with the agreement we've got with Ryan Specialty, whatever comes in for RAC Re could actually put us into double digits for next year. Obviously, that's going to be dependent upon the underwriting platforms underneath and what they see in the markets, as I mentioned. But with RAC Re, with given what we've already got going on in our own core book with the expanded and new initiatives, we could be in the double digits next year.

And then my second question is on the G&A ratio, right? So the fees right on the RAC Re are contra right to G&A. And I believe, right, that wasn't contemplated when you guys told us sub 11 next year. So could you help us, I guess, kind of think through like the tailwind relative to the G&A guidance? I know it takes time for that to earn in, but I still think that there would be some tailwind expected in '26, right?

That's -- I think the real important thing that you've got there, Elyse, is the comment where it's going to take some time to earn in. The deal with RAC Re is actually done through our Lloyd's Syndicate. So the announcement was basically on an underwriting year basis. So when we think about that from, I'll call it, SEC GAAP gross written premium, we would expect to see the written premium actually come in over a 3-year period. So that will be coming in '26 to '28 given its underlying coverholders, you got to think about the underlying as a risk attaching basis. So the earned premium is actually going to be pretty much over a 4-year period, you're thinking '26 to '29. And so it will ramp up slowly.

So as we think about calendar year '26, the impact from the fees are going to be pretty de minimis in that very first year because the ceded earned will take that same time to ramp up.

And then one last one, capital. Is the Q3 buyback a good run rate level? And any current color you can give us on your AXIS capital position today?

Yes. I'll ask Vince to chime in on that, but we did buy back $110 million in the third quarter. Again, our philosophy is we are going to look at growing the business first. We do want to see organic growth, and we're going to invest in our platform. As Vince talked about, we've been doing a lot on the technology side with regard to improving ourselves as we go to market with our distribution partners and clients.

Having said that, I would not look at $110 million in a quarter as any kind of run rate. As we said, we're going to be opportunistic on our buybacks. We're not going to be held to any specific number quarter-to-quarter. We have a new $400 million authorization and we'll look to use that as we go forward based upon how we look at the business, where we see the growth coming from as well as where we think we're trading on any given quarter.

And with that, I'll ask Vince to chime in.

Sure. The only thing I would come on over the top with Pete is, Elyse, you know that we'll continuously evaluate our capital position assuring ourselves that it's aligning shareholder interest with balancing the prudent risk management approach that we've taken. You know the chief source of using our capital will be inside the operating model. We expressly indicated an acceleration of expenditure in our technology and data analytic infrastructure, the continued hiring of persons in the quarter, discrete. We hired over 140-odd persons into the organization. And so we continue to invest. We're very pleased with the assimilation of our new colleagues that are supporting the growth that you're evidencing from us. So we'll maintain our course. We're not going to sort of guide on the order of magnitude of buybacks. We will use them opportunistically, as Pete has said. We've shown that through this calendar year over $600 million or approximately $600 million just in this operating year. So I'll leave it there.

The next question will come from Josh Shanker with Bank of America.

I want to talk a little bit about paid to incurred ratios. Obviously, they remain precedingly high. You have a lot of growth ambitions in what some people are calling a soft market. Generally, you're already growing faster than the industry, which usually depresses paid to incurred. Can we talk about where paid to incurred is right now, but also with an eye on what to expect. If you are growing as fast as you see that you might be able to, that should be depressing paid to incurred ratio? And is that what we should expect going forward?

Josh, this is Vince. I'll start out. Thank you for your question. We commented last quarter the first instance that you saw a paid to incurred in an elevated state that we look at this indice really over a continuum of time. And I thought it really appropriate this quarter to unpack sort of our point of view and our learnings of what this ratio really means. We think, frankly, it is only one of many points that you look toward in terms of confidence in the health of the portfolio, the health of our reserves. And we think there's a few underlying factors that you'll continue to see evidence in the AXIS journey.

Josh, when we indicate going on a transformation, we talk about the mix shifts in our underlying portfolio, long-tail versus short-tail. You're seeing access with more than 50% in short tail. You see large losses from time to time arise inside a specialty organization, though decreasing in the last few years here at AXIS from time to time will evidence some of them.

Third, you see timing differences between when we're paying some of these large losses and when they were originally a case reserve. And finally and perhaps most critically, from my learning point of view, whenever you undertake transformation and you make changes in your claims organization, including not only numbers of persons, the skills of those persons, the creation of newer capabilities in the form of complex claims organizations, shared service organizations, you invariably will get some form of acceleration.

And so taken together, I would tell you expressly on behalf of AXIS that we're very comfortable with what we're observing. We would not be surprised to see if there are additional quarters reported, were paid to incurred seems elevated and overlaid with some of the statistics that Pete shared with you that we look at equally and importantly, with a critical eye, we feel very comfortable.

But nonetheless, we appreciate the interest in the question. And you also referred to this notion of growth. Again, we're happy to unpack where the growth is coming from, what the line of business distinction is in terms of short tail versus long tail. What size customer it is and what kind of profit profile we believe it holds out. With that, I'll ask Pete if you'd like to come over the top with any additional comments.

Yes. I think I would. Josh, a couple of things just to point out. One, I appreciate the question, getting to the hard of some of the question, we do want to say we're very comfortable in the strength of our insurance reserves. And we do review a multitude of metrics each and every quarter to give us confidence in those reserves. So it's not only paid to incurred, but we were looking at, as I mentioned, IBNR to total reserves paid to ultimate factors, incurred to ultimate factors, and we look at these all by line of business as well as by duration. .

And then looking specific to this quarter, when we look at the paid to incurred ratio, a couple of things we're seeing is, one, we are having significant improvement in our claims organization in North America because as we've talked about through How We Work, it's all across the company. And in our claims organization and insurance in North America, we've actually seen an improvement where our closing ratios. So that's paid to new claims has actually improved from 98% last year to 118% this year. So we're getting after more of the claims. We've seen some of the courts open up. We closed some claims, most importantly, those paid claims we paid in the quarter and some were material, especially in the FI book and these are all pre-2019 claims. They were fully reserved for. So there's been no surprises on the reserve front that we've seen.

So overall, we feel really good about where our claims organization is improving and evolving to, and we feel very good about the level of the reserves on our balance sheet.

Your next question will come from Mac Carletti with Citizens.

I just had a small cleanup question on the reserves. Pete. You talked about the -- it wasn't a huge number. I think the $19 million of favorable in the quarter, $15 million in insurance, $4 in reinsurance. Can you just talk a little bit about where that came from just sort of a more short tail, long tail? And were there any bigger moving pieces behind the scenes? Or was it just pretty kind of enough to see here and just a broad small favorable?

Yes. Thanks for the question. All coming from the short-tail lines. When we look at insurance, it actually came from property, credit and surety as well as A&H. On the reinsurance side, came from agriculture, 2024 continues to perform really well. So all from the short tail lines. And in the background, always a little bit of movement when you look across the accident years looking back. but nothing material or notable. And so still feel very good about the reserves in totality as well as across the accident years. .

Next question will come from Charles Lederer with BMO Capital Markets.

Pete, you mentioned the favorable impact of mix on the underlying loss ratio in insurance. I guess just based on the accelerating breadth of growth in that segment that we saw in the quarter, how do you see that written growth impacting the ex-cat loss ratio as those premiums earn in?

Yes, that's a great question, Charlie. As we look forward to next year, obviously, it's going to be very dependent upon what we see in the markets and where rate trend goes from here as well as right now, we have a really good property in the quarter, but we've also seen really good growth in our long tail line. So -- as I look forward to next year, I wouldn't necessarily want to give a number for next year, but we feel really good about where we are in insurance. But as the mix changes, that will impact the loss ratio next year. .

Again, overall, we look at the combined ratio, some of our longer tail lines have really good acquisition costs associated with them. So we're feeling really good about the overall insurance segment as we go into next year.

And then just on the G&A expense ratio. I know you mentioned you're still very confident in getting below 11%. I guess last year, you had a large catch-up in 4Q. Thanks to some really strong ROEs. I guess should we be thinking about the same kind of dynamic this year, just given it's been a light cat year.

Yes, Charlie, this is Pete. I appreciate the question. As we see here through 9 months, we've done really, really well for our shareholders and got to complement the AXIS team for all the work they've been doing, not only with like cats, but as we think on an ex cat basis -- is still able to grow the underwriting income and a really good ROE as we look at the ROE year-to-date at about 18.2%.

So as we think about the end of the year, given we still think really good, and we're very confident about the fourth quarter, my expectation is we could be some reward for our teams as we go into the fourth quarter. So you may be looking at like what we did last year as consistent with what we might be doing this year, but really, really appreciative of the team overall for all the great work they've put in to create the results we've got this year so far.

Next question will come from Jane Lee with KBW.

My first question is on renewal rights. I'm guessing that it plays a role in the solid precision line growth? Like can you provide an update on how is the profitability of the acquired book comparing to your underwriting expectations.

[indiscernible] this is Vincent Tizzio. We had about $6-odd million from the Markel renewal rights transaction in the quarter discrete. We're pleased with the underwriting of that business. It's access-led and it is meeting our expectations in terms of limit, remit, scope of terms and conditions. And thus far, we're pleased with the sort of the trade of what we expected through the renewal rights to accept versus that, which we've non-renewed. And finally, we're very pleased and appreciative of our distribution partners for the support that they've lent in this transition from Markel to AXIS.

Got it. Just a follow-up on that. So what's kind of the renewal retention rate being there? And how does the pricing on those renewals compared to the back book? .

I have data on the latter part of the question. On the former, I have to search and see if I have the exact retention because, again, this is a renewal rights transaction. It wasn't part of our renewal base in the prior period. In terms of the acquisition or the hit ratio of what is coming over for potential retention. It's probably around half of what of the total, which would be in keeping with our expectation. We wouldn't expect reasonably to accept every renewal that's coming over.

In terms of pricing, it is aligned with our expectations within the broader FI portfolio which is a very strong portfolio for AXIS, well managed and historical for us. We've been in the business a long time.

Next question will come from Andrew Anderson with Jefferies.

Just looking at the A&H growth within insurance, it's been doing really well for a couple of years now. Could you maybe just help us think about kind of how you're achieving that level of growth, whether it's kind of pricing, distribution, product breadth and maybe why that's a little bit different from the growth levels within reinsurance? .

This is Vince. I apologize, Pete. Within insurance, we're very pleased with our A&H business. It is predominantly driven by our business, which is a partnership business with that was the predominant driver of growth in the quarter and will be for the year. Additionally, we've spoken in prior quarters about measures we were taking to support our other companion divisions within A&H notably out of London market and Lloyd's. We have a very strong group there that is performing well, continuing to grow double digits, performing profitably.

Further, we've reshaped our AXIS Group Benefits business over the last several years. It's been repositioned. It's in the phase of really executing its new underwriting strategy there again, it demonstrated growth, but off of the total basis, it's really driven by PET. The outlook for PET for us remains favorable, though Pete would describe because of what he detailed in the first or second quarter, I can't quite recall the reinsurance change, that level of GWP growth will dissipate, but the net will continue to be strong for AXIS. And certainly, most importantly, we like the profit outlook of that business.

Andrew, this is Pete. Just to add a little bit of color. About a year ago, I think I know we mentioned that in our agreement with Fetch, we became the sole provider of the program. And that really helped because we were only 50% provider beforehand. So that has helped the PET growth this year really drive A&H through the first 9 months. We started being the sole provider, we got to the fourth quarter of '24. So when we go to the fourth quarter of '25, that growth rate is going to normalize a bit. And I would expect A&H while it was up 35% in the third quarter. I would expect it to be more up just into the double digits when we get to the fourth quarter where that will actually normalize.

If you like to look at the growth rate overall, you remember, I mentioned net written premium was actually negative in the first quarter. That's what was causing some anomalies, and that was because while we took over all the gross, we were ceding 50% of that PET business to the other partner that Fetch had. So all of that will normalize in the fourth quarter. So the gross growth will actually slow down. But if you're looking at like the net earned premium that you can see in the Q, that's been kind of normalized all year. That's probably a better metric to look at.

And then just on the technology spend. I think you talked about the $100 million that you laid out at the Investor Day. Could you kind of level set where we are relative to that $100 million? And could we be seeing some benefit to the expense ratio in the next couple of years? Is that spend levels off.

Yes. We noted expressly that we've accelerated the expenditure. That number certainly in the period that we talked about will probably approximate $150-odd million over the 3 years in terms of its efficiency, no doubt. You should see efficiency gains on the expense ratio. In the quarter discrete, just looking at North America, we're pleased with the early insights that shows improving quotes that are up about 27% year-over-year discrete 3Q '25 versus '24. Buyings are up about 19%. And so in the businesses that have had the effectuation of our technology enhancements, we are seeing individual productivity gains. We think that's going to continue to get stronger. The partnership between our How We Work organization led by Ann Haugh and Mike McKenna, who leads North America, will only get better over time. We're seeing a number of proof points, whether it be between the operations relationship with underwriting, the insights from actuarial being made more quickly into the underwriting. These are all going to show increasing propensity and efficiency in how we go to market. So we're pretty optimistic.

Your next question will come from Brian Meredith with UBS.

A couple here for Pete. First one. Pete, will AXIS qualify or will there be a benefit from the substance-based tax credits that Bermuda announced, I believe, in September.

Yes. Brian, this is Pete. We're keeping our eye on that. Right now, it's always a bit early to tell. I'm going to mention that on the quantum, but we should be getting some benefit. But I mean the consultation paper is out. We've submitted comments back to the government. We worked with the industry to do that. We should get some substance-based tax credits to see what they are. It's going to depend upon what the final legislation is. We should expect to see that mid-December or so. So we'll obviously have more to say about that on our fourth quarter call. .

If you recall or if you've looked at it, there's kind of a transition timing on that, too. So it may be some benefit in '25. It will go into '26. But we should get some associated with that. Obviously, our footprint on the island is not as big as others. And so our benefit, it will be beneficial to us, but hard to say where the quantum is today.

Great. And I'm assuming that's a benefit to your G&A expense ratio..

Yes, that would actually flow through G&A because that actually would show up as tax credits against the payroll. So definitely we go through G&A on the substance base. Yes.

Great. Second question, just -- I don't know on brings up again, but the paid to incurred loss ratios. You mentioned some large claim payments right? That kind of skewed it maybe the last quarter to in the insurance segment. Is there any way to kind of ballpark what those were and maybe it gives us a better kind of a run rate pay-to-incurred ratio when we strip out those large claims activity?

Yes. One, I would say, a lot of them were central to our FI book really, and they're actually coming from 2019 and prior. When we look at how big they were, there were a couple that were in there on a gross basis, Brian, in excess of $20 million. So when we look at it in total just that line of business, the top 3 claims had in excess of $50 million worth of pay in the quarter. So that actually skews it a bit.

And then last year, actually, interestingly, Q3 last year just happened that in the quarter, we got about $20 million of recoveries from our reinsurers in the quarter, which depressed the number last year in the quarter. But overall, I think what's really important as we think about the paid to incurred especially, a lot of improvements in our claims organization. Megan, and her team are really embracing how we work and putting better processes into place. So in North America insurance where we're seeing actually the close to new claims being at 118%, that's really quite good, especially since we're closing these claims within any reserves we had already been putting up.

Got you. And then I guess last one, too, and maybe this is more for Vince. The RAC Re deal, maybe give us a little bit of color on kind of what do you think the margin profile of that business is going to look like and the kind of make up kind of the business you're expecting to receive since its business? .

Well, the the mix of line is in keeping with our broader portfolio. Property will be a meaningful participation -- and then there's some niche specialty lines within construction and professional and marine, where we have strong confidence in the underlying margin of the business and now what is going to be through these MGUs. So I would say it's in keeping with our overall profit profile of insurance that we've spoken about in the historical past, I don't see anything untoward affecting that.

Next question will come from Robert Cox with Goldman Sachs.

This is Jack on for Rob here. I was wondering, when you talked about the mid-single-digit to high single-digit growth in '26, can you just give us like any type of color on what lines you're expecting that growth to come from in '26? Or kind of how you're building up to that overall growth rate?

I think what we'll say in this regard is One, we're not going to lay out our playbook of exactly where the lines are coming from. But suffice to say, we have great confidence in the continued growth trajectory of our new and expanded initiatives in the quarter, discretely, they contributed meaningfully against the $165 million of our overall insurance growth.

You know from our prior disclosures, we are a market leader in marine and energy segments of professionals, certainly within the wholesale, AXIS casualty, marketplace, the property marketplace and increasingly in the lower middle market. And so taken together alongside our niche, highly defined, delegated relationships in surety and PET. We think that there's ample growth within these lines to reveal itself in '26.

Got it. And then when I look on an external basis, it looks like on a net premiums earned property and some of maybe the lower loss ratio lines, credit property, cyber were a little bit less of a grower in mix for the quarter relative to the first 2 quarters. I'm just trying to work through the business mix impacts on a net premium earned basis that's supporting kind of the underlying margins. Is there anything you can think of on like a sub-class basis or a better way to look at that from an external perspective? .

Yes, this is Pete. So I would tell you that if we look -- to your point, if we look year-to-date, the short tail lines are up 60% -- or at 60% versus 57% last year. But in the quarter, it was 59% versus 58%, so very close, but down a little bit as we think about it on an earned basis. But the other thing that's also going on is we are seeing some some adjustments within SEC classes, for example, in the political and credit risk where we're writing more surety business, which has a lower loss ratio.

So it's going to be hard to see overall. But as that mix ebbs and if we do right, as you note, more long-tail business that might have a higher loss ratio. Again, I'd point to the combined ratio, we'll look at because some of those lines have lower acquisition costs associated with them, and we feel good about the combined ratio going into next year. That's kind of what I -- why I pointed that out.

The last question of the day is a follow-up from Charlie Lederer with BMO Capital Markets.

Just a quick one. I think this is the first quarter with the new fully in place for the whole quarter. I think you guys were expecting some deferred gain amortization to come from that deal over time? I know smaller dollars. But was there any of that in the quarter? And I guess, should we expect that to be a small benefit next year?

Charlie, this is Pete. Yes, there was a deferred gain in the quarter. It actually runs through other income. My recollection is that number was about $1.6 million in the quarter. That will adjust over time as we get further out in the duration. But yes, that will actually come through in 2026. I don't have the exact number for 2026 in front of me, but it is a very small number that will come through next year also through that line. .

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Vincent Tizzio, CEO, for any closing remarks. Please go ahead, sir.

Thank you for joining today's call. We continue to be encouraged by the sustained positive momentum in our performance and have confidence in our future. I want to extend my deep appreciation to all of our AXIS teammates worldwide for their outstanding work that they deliver day in and day out. This concludes our third quarter call. We look forward to updating you on our continued progress in the quarters ahead. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

We are going to move along. Our next session has Vincent Tizzio, CEO of AXIS; and Peter Vogt, the CFO. And I'm going to gloss over the implicit awkwardness of this question and say, first of all, that I've been working with Pete for a long time, and I think you've done a phenomenal job in terms of confidence and credibility.

In that context, can you talk about Matthew Kirk and what he's going to bring to AXIS?

Well, good afternoon. It's good to be with you. I would challenge you on the awkward -- this is not challenging or awkward at all. Pete and I have been working a long time on the succession of his role. We're so grateful for what Peter has contributed. Peter will be with us throughout 2025. He'll be signing the K.

And so this is an orderly transition. It's a body of work that we undertook together to find a colleague that first had a cultural fit with AXIS. Secondly, had a broad-based experience set in FPA, capital management and understanding the specialty markets. And so this was a deliberate search. In Matt Kirk, we found someone that we think is ideal to succeed Pete. He has all the attributes that I just referenced, and we're excited about the partnership. Matt will start with us in November of this year. But to be clear, Pete is going to be our CFO for all of 2025 and will serve as an adviser to me in 2026.

That's fantastic.

He has done a great job, as you know.

Yes. And I haven't always said that about everyone that I interact with because it's not always true...

And a great partner.

But more than happy to acknowledge that. You've gotten some form of this question many times. But more recently, another prominent specialty insurer has said, "Okay, we're out of reinsurance, right?" They did a renewal rights deal. How important is it to AXIS to have any reinsurance as an operating segment?

So we appreciate the question. And the good news is the consistency of what we've said will hold true today. First, we've sized what we think the contribution of our reinsurance business would be. We've laid out a very clear product strategy. We have an emphasis on the specialty lines. We have a very selective perspective on the financial lines business and a highly cautious underwriting appetite on the liability.

More broadly, this business is a complement to our insurance business against the prism of, a, the sizing of the business, some 15% to 20-odd percent of our company's total revenue. Secondly, it's a bottom line focused business that's going to produce low 90s combined, a very healthy GA management and provided that we could meet that test and continue to execute with that, this business plays an important role for AXIS.

I'd remind you that the 2Q discrete combined ratio is another extension of consistency, not since 2016 have we evidenced the kind of consistency in our underwriting results within our reinsurance business. Pete, I don't know if you want to add.

No, I think you said it quite well. It definitely is there to complement our insurance business, Meyer. And it does give us access to some specialty lines we don't have on the insurance side, such as agriculture, and mortgage, which we find quite attractive right now.

Okay. So just as a quick follow-up to that, is there any cost in terms of, I guess, potential reinsurance cedents that you compete with on the primary side being less interested?

In our current underwriting appetite, that potentiality is diminished. Obviously, with a selective professional and a very cautious liability, we don't think that that's a major challenge. Now as we continue to cycle manage and the marketplace changes, we'll look at the calculus of what those 2 businesses can do for our company. But at the moment, we like our underwriting strategy.

Okay. Fantastic. One point that I want to emphasize, as I've done in prior meetings is that I want to make sure that anyone in the room is getting the information that they're looking for. If you have a question, please don't hesitate to raise your hand, and we'll get you the microphone and you can ask whatever you want.

But in the interim, I want to talk about the incentive compensation at AXIS, right? It's a function of growth in diluted book value per share. One component of it that's been sort of very welcome positive development is reserve releases, which I think -- to me, at least certainly signal great confidence in the reserve strengthening that was done, let's call it, just under 2 years ago. How does that factor into the calculus of incentive compensation?

It's included. But bear in mind, if you go back to the reserve charge in December of '23 and you look at the compensation outcomes for Peter and myself, we certainly did not enjoy the overall success that came in that operating year, notwithstanding the reserve charge. So we think we've brought strong alignment to shareholder interest in our compensation formula, and it's been working for us even in the recruitment of people into the organization.

Okay. I'd love to talk about recruitment, if I can, just to jump off on that because I don't know if I'm over-interpreting, we just have more news stories of underwriters or of insurance producers moving from company to company, which to me sort of highlights the fact that there's probably not enough talent to populate every insurance entity around there. Can you talk about how AXIS is competing for talent in this marketplace?

Well, first, we have humility that there is a war for talent. Secondly, we think a critical component of our recruitment strategy is the culture that we create within the company, the respect of the specialist practitioner, the support and having complementary capabilities in claims, actuarial, operations and technology. These all go into the calculus of one's choice.

And certainly, being a brand as respected in our chosen markets within distribution is certainly aiding that. And as you've mentioned and as we've discussed in the past, we've had no shortage of teams joining AXIS, and we continue to have that as a core part of our growth strategy and our capital use strategy.

And I guess I'll follow-up with Pete, is the associated expense tracking with what you would have anticipated in budgeting?

Yes. Yes, we've done a very good job at being able to actually look out the next 12, 24 months at where we think expenses are going to go. And the key with these teams is actually they've done a very good job, and we even talked about it on the second quarter call, where our new and expanded initiatives from 2024 contributed about $250 million of premium to the insurance group in the second quarter.

And so when we bring these teams on, we know that there's a G&A right away. We also have a plan. What's the up-ramp? How long is it going to take them to get to like, I'll call it, paying for themselves and then generating more. And they're all doing very, very well.

Okay. But I'm going to infer from that, that there's still additional progress as the $250 million grows to absolute whatever?

Yes. The run rate on those new and expanded businesses has a long road in front of it, and it's being executed with the kind of discipline that we committed to subsequent to the reserve charge. We're bringing in as much -- excuse me, information management to support the ongoing portfolio construction of these businesses, and we like the signals exceedingly well.

Okay. Fantastic. And again, looking around the room, if there are questions, please don't hesitate to let me know. I want to talk about distribution because a theme that's been emerging in specialty lines, in E&S, however you want to phrase it, is that the wholesale brokers prefer to work with wholesale-only companies? That's not always practical for individual lines of business. And I was hoping you could talk about how AXIS can balance those because you've got a decent array of distribution channels.

Yes. First, we've been in the wholesale space almost since inception. And so we think we have intimate knowledge about the wholesale channel distribution. Secondly, a couple of years ago, we made a strong declaration, within the U.S. we created a wholesale-only business unit. We added some 4 to 5 different products widening our aperture and appetite to that incredibly important channel.

And it's a channel that not only pays a premium for those that know like and trust one another, but it has to support its capability and innovation, product design, its ability to cycle manage throughout these different micro markets that we pointed to in the second quarter of our earnings announcement. And so we think that merely hanging a shingle and saying you're in the wholesale space is not really a great strategy, that you have to have all of the component capabilities to meet that channel of distribution needs and expectations.

And that's the financial wherewithal of the offering. It's the artistry of the terms and condition remit. It's having the claims paying capability that could be consistent. It's having the consistency generally in how you're calling for the business and how you're trying to bring innovation to that segment. And there's a whole bunch of innovation that's going on in the wholesale channel.

So if I can follow up on that, you've talked about recruiting and you've talked about this -- the importance of the relationships. How quickly can you provide the AXIS, I'll call it, umbrella of relationships with distribution to newer teams? Is that instant? Does it take time?

Well, it depends on whether or not the underwriting team that we're recruiting is for the wholesale dedicated space or the retail space. And so as you know, most of the wholesale underwriters and teams that we attract come with their own following of relationships within the wholesale channel. That is in part figured into our calculus of why we're attracting them to AXIS to begin with. So we try and bring in complementary talent that first starts with the culture, how they define success. It's not merely about the top line, it's a bottom line focused underwriting approach.

And then if I can follow up on that on the logistical side. So you bring in a team and they've got a relationship with a broker you maybe haven't worked with in the past or haven't worked at as extensively. How important and maybe how quickly can you say, okay, we've got a relationship now because of this product, but we've got a whole bunch of other products that you might be able to distribute as well.

Yes. So -- we view that in a couple of dimensions. The first is, in instances where they're complementing an existing capability of a product or a type of industry within a product, we expect the run rate of that person to take pretty immediate effect, certainly not instantly, but certainly within the first year that they're underwriting our business, they'll be accretive.

In instances where we're going into different segments within existing industry niches, construction, you've seen AXIS announce a number of construction underwriters in the last year. And they're going after segments of the construction space that we weren't as substantial in. That may take a little bit more time. Some of it's trading off of the relationship of the people that we've brought in. Some of it is bringing us our stronger, broader product capability to that channel as well.

Okay. Great. And again, looking around the room, just to make sure I'm not overlooking anything. You've talked about a focus on penetrating the smaller middle market, if you will. Can you talk about, I guess, what led to that decision, which product lines you're emphasizing and what the distribution tools are to build that book of business?

Yes. So the premise for us was, we viewed it as an underserved marketplace that was right in the wheelhouse of our wholesale distribution channel. We think it's a vast market. We looked at business concerns with $10 million in receipts or turnover to $100 million. They buy up to a couple of hundred thousand dollars of an unbundled offering. And they really cascade across all of our product set.

And we knew that, that was a market space that was underserved, that the response time by those against whom we compete wasn't always optimal, that there was a need. And so one, we wanted to meet the need. That's part of why we think good specialists exist. Secondly, we knew we had the product knowledge, and we're leveraging our existing product capability. Third, we knew we had to enhance the operating capability, the cycle time, the speed of our quoting capabilities.

And fourth, we had to make sure that our actuarial insights and claims capabilities were up to stuff. And over these last 2 years, we've made considerable progress and ground at penetrating that customer segment, which is, again, in the United States through our wholesale channel that we view as vast, not growing -- going away, excuse me, and one that we're gaining increasing capability at meeting and serving the need of.

And how effective is the experience that you've got, whether it's underwriting experience or actuarial data for larger accounts for this -- this group of smaller accounts?

We can leverage part of the information management that we have inside the company. I have built a number of these businesses for other large organizations over my career. I come to this customer segment with a demonstrated knowledge and a belief in its wherewithal within our portfolio and its retention and profit outlook benefit over the intermediate term. So there is a lot of focus, a lot of work, and I congratulate the North American leadership team for what they're doing and how they're executing this actual strategy.

Fantastic.

Yes.

One topic that's become increasingly sensitive recently is the topic of MGAs and outsourced underwriting. There is a, I'll call it, glib assumption that, well, if it's not their balance sheet, they're going to underwrite terribly. AXIS gets business through MGAs. Can you talk about your processes for evaluating and sustaining underwriting discipline when you give them the pen as it were?

Well, reserve charges create humility for any good underwriter, it seems to me. And when we executed our reserve charge included within that, was a component of our U.S. program business, which was all delegated. And there was a laundry list of lessons to have be learned. And so we reconstituted that strategy. And the first thing that we did was bring in new leadership to run our North American business.

The second, of course, is we decided on a complement of definitions. The first was how do we align financial interest between ourselves and our MGA? And there's a variety of methods that we undertook there, including who controls the claims, what loss picks govern the trigger of the profit commission agreements. The second was making sure that we had a collateral relationship with these entities. Our former strategy had a number of one-off program relationships where we knew no one else in that firm beyond the owner who could have been a mom-and-pop size shop.

Today, we're transacting with substantial MGA partners that tie to broader relationships within AXIS. Additionally, we're bringing a focus to the instances of the products that we want to use MGAs. If you look at 2 important contributions in North America, which, by the way, is about 14% of our business in insurance comes from MGAs in North America. You think about our relationship with Fetch, in the pet offering of A&H. If you think about our partnership with DUAL in the provision of surety. These are 2 instances that we think showcase the definitions I just gave you.

Lastly, we think there's a lot of innovation left in the MGA space that combines both traditional risk transfer with the utilization of third-party capital, ILS and other vehicles that aggregate our appetite of risk in different lines of business. And we think there's a lot that still has to come from that segment in the form of innovation.

And then finally, we will exhaust all of our risk transfer capabilities, look selectively at our MGA relationships and make certain that we're solving for: a, a customer segment that we can't reach; b, an efficiency play that we can attain in the immediate term; and, c, a reliance and relationship with the practitioners that we're betting on that will meet our immediate expectations of a return. And we think that, combined with the innovation work that we're doing with existing MGUs and MGAs will really pave a profitable growth journey for AXIS.

Can we extrapolate from that, like as you develop or enhance the skills to ensure underwriting profitability, adequate underwriting from MGAs, we're certainly hearing of more and more MGA formation, more and more MGA registration. Can we think about that as a -- or how should we think about that as a source of future growth for AXIS? In other words, if you can do this well, probably you can apply it to other lines of business.

It will play a role. And I go back to what Pete said, if you think about the new and expanded, we had some over $200-odd million of new and expanded premium hitting our 2Q discrete. So it will play a role. It won't be the majority of the role, though, either.

Right. Okay. Fair enough. And again, if there are questions in the room, please let me know. You mentioned Fetch, but I want to dig a little bit. There are a number of insurance lines of business where the technical name doesn't really get to the heart of what is actually being covered. I always say Inland Marine and Accident & Health are 2 of those. Can you talk to us about AXIS' Accident & Health? I wasn't sure I get that out right. Book, what's in there? What are the growth opportunities for that?

Yes. So we'll tag team in this, Pete. In the insurance business, it's predominantly a pet accident and health business. It's supplemented and complemented by a travel -- business travel accident and personal accident capability out of Lloyd's. In the reinsurance business of AXIS, we have a medical stop loss and a limited medical liability portfolio. They're noncontiguous, they're nonaggregating with one another.

But it's a bottom line focused business unit. It's contributing meaningfully on both sides of the equation. And the status of the marketplaces for both are in different places. We have a lot of caution on the medical side in our reinsurance business. We have a strong growth ambition that is supported by profit on our pet business. And we have a selective Lloyd's business that's led by a really good team and long-standing practitioners. I don't know if I've missed any...

No, I think you covered it all, yes.

Okay. I was going to ask on -- I'm going to ask this in 2 different ways. The first is on the pet side. I know we hear a lot about medical inflation. I don't know if that's relevant on the pet health side either currently or as a concern going forward?

Well, I think you have to have a rigorous filing component to the product strategy in pet. It does play a role. We have a strong team. It's an admitted offering. And it's part of something that Pete and I monitor carefully to make certain that we're keeping pace with the filings in order to observe not only inflation, but all forms of rate need that we observe in the portfolio.

Okay. And then same question on the reinsurance side, if you're -- stop loss. There, I assume that just the nature of the product is...

Yes, 100%. Yes.

Sort of leveraged inflation?

Definitely...

Yes.

Okay. And the market is still absorbing the rate increases that are necessary for that?

It's selective on the reinsurance side, which is why you've seen the results that you've seen from AXIS. On the insurance side, we've been very transparent about where the growth is coming from, and we like the trade comfortably.

Okay. Fantastic. Is that mostly domestic, the -- where the risk resides?

Yes, it is.

Okay. If we can shift gears a little bit to professional lines, which again covers a lot of stuff, probably with very different pricing dynamics. Can you talk about what's in the AXIS book? And -- well, I'll start there, and then I'll have follow-up.

Yes. So Pete, I would welcome tag team because in the SEC, the way we report professional may not be easily understood to our investors. We include environmental, allied health, Arizona missions, public D&O, private D&O to just name a few. And so this is a business in the second quarter that grew approximately 15%. It had strong contributions from all those segments, except public D&O.

So it was broad-based growth in the professional classes. It had an emphasis in our newer and expanded classes of Allied Health as well as our continuing business of Media/Pro, our old architects and engineer portfolio. They all contributed well. We continue to execute a very strong private company book of business on D&O. And our international team is continuing to execute its niche portfolio.

And as I said in the 2Q call, we're observing a flattening out of the public D&O rating environment. We will test the pricing stability here on out and see whether or not we think there's a fair trade. At the moment, we said there isn't, but we'll be highly selective. Anything I missed there?

No. I think -- well, we also have financial institutions. They're included in the professional lines that saw some growth in the second quarter. So it was kind of a broad-based growth across professional lines. And I would say that at this point, public D&O is less than 2% of the professional lines premium, so that gets to be de minimis for the insurance. So we'll see what happens to that market over the next couple of years, but we've really driven it down given where we saw pricing over the last 2, 2.5 years.

Fantastic. Is the -- go ahead, I'm sorry.

I'd just add to the FI. I think it's a critical point that Pete made. If you think about the renewal right transaction that we actioned with Markel, that business has been coming over in the third quarter, we'll report out its contribution, but it's really leveraging off of an established reputation of financial institution professional underwriting that AXIS has earned, certainly well before my journey, it's got a number of teammates that have been with the firm for more than a decade and have done a really good job. So I'm really pleased with what that portfolio is creating.

Okay. And I know it's just September, and I don't know -- not that much time has passed since the second quarter call. But we've been hearing fairly consistently about this green shoots or at least flattening of public company D&O. Is that still holding true? In other words, do we see that initial momentum of better pricing?

I think it's selective. I mentioned that we've been experimenting with pricing some of the business that continues to come in as submission opportunity. I think it's quite selective. I don't think there's a universal theme that we would attach. I think we're going to approach it with the bottom line focus that we committed to our shareholders to deliver in all of what we do, but we think a good specialist does experiment with what we see out there as potential trends or new opportunities.

Okay. And I did want to talk a little bit about trends. Because we hear about social inflation, and these are, call it, medium to longer tail lines of business. Is the social inflation that's been a huge issue in commercial auto and related lines of business? How does that manifest itself in the various subsegments of the professional lines book?

Well, there's different trend assumptions that are going to drive each of those different products. I think the reliance that our shareholders can take is this is an underwriting model that's fairly well integrated between its claims, actuarial and underwriting functions that the kind of financial results that we've been posting these past several years ought to give some confidence that we're going to be timely.

We're not going to be reactive, and we're going to try and maintain as anticipatory posture on pricing the business as adequately as we can. And we've built a number of tools to help safeguard that over the last couple of years.

Okay. Fantastic. Sort of interesting story here I want to pass along, that Vincent and I were traveling in London, and he was evaluating construction projects very much from the perspective of an underwriter saying, hey, there's a risk that we would be uncomfortable with and stuff like that. And that very clearly to me, highlighted your mindset as, an underwriter is a underwriter. When you bring on talent, how much guidance oversight are you providing given that mindset?

So first, we try to attract persons of experience clearly for the benefit of their underwriting insights. Secondly, we collaborate on our view of risk. And the view of risk is not just a model. A specialist underwriter is not living off of models. And they're bringing their subject matter domain, their knowledge of the peculiarities, the nuances in risks that aren't always covered just in empirical data. It's their experience, it's their view of the risk, it's the geography, it's the safety. It's a number of considerations.

And so I think it's a collaboration. And Meyer, we don't attract people with the kind of success that we've enjoyed have certainly under, let's call it, a 7% voluntary turnover ratio, a greater than 80% engagement score in our company by having an environment that people don't want to join, right? We've got a pretty neat environment that people are attracted to the culture. And so you have to assume -- implicit in that is when we hire underwriters, we're respecting their subject matter knowledge. We're welcoming it. We want to invite the discussion of their view of risk that may be different than ours, and we test it. That's how we do it.

Okay. That's helpful. One follow-up, if I can. I was hoping to better understand the process of vetting underwriters. Sometimes -- and this is just like one example, it's not all of them. You have a good underwriter at a company that doesn't have great results. So if we were to look from the outside, look at schedule. People say, okay, that's not good. How do you confirm that underwriter is actually good at what he or she does?

Well, we don't ask them to bring their individual P&L. You learn this by reputation. You learn this through the question-and-answer part of the interview processes that we undertake. You go through a bunch of scenarios with people and talk about risks, and you gain a pretty good insight from that. But certainly, we don't ask for proprietary information. We compete in a landscape where people do create their own brand identity and knowledge and awareness. And so it's a process, and it's a process that's detailed in the way that I just outlined for you.

Okay. Fantastic. I want to talk about, I guess, data and digital investments. And I was hoping that you could explain in the specialty world where so much is dependent on underwriting expertise, experience and judgment, how you're leveraging data to make better underwriting decisions?

We look at this in a number of different lenses. The first was creating an ability to leverage the 20-odd year worth of data that AXIS has created, complement that leveraging with third-party information that we can buy through ISO and other third parties that information management is available.

Secondly, it's defining the utility because of your direct point, a specialist isn't a block of terms and conditions that are exact on every transaction. There's a lot of manuscript wordings. But there are pattern recognitions and other deducements you can take from the investments we've made in our data and analytic capability. It's led out of our Chief Underwriting Officers unit today.

And we've been doing quite a bit of work there to perfect our utility of this information. I would reason with you, it's contributing to our strong underwriting results. certainly within our insurance business, the kind of combined ratios that we're posting, I think, give evidence of the confidence we have in our health of business. And I think our data and analytics are playing a role there, whether it's through our tiering tools or a whole other range of capabilities. Pete, I don't know...

Yes. I think the key there is something like a tiering tool. It doesn't give a black and white answer to the underwriter, but it gives it a sense of where we think the risk is playing on a tier, whether it's something they should go after or not. But then the underwriter, especially with a lot of the manuscript reporting we see -- can look at it and say, I've got an exclusion or I don't have an exclusion.

So therefore, that isn't necessarily in the data, but the data is pointing me to look at something. And then therefore, if I've got that exclusion, hey, I can actually quote this is going to be a good risk for me. If I don't have it, you know what I'm going to stay away from this. So it's a combination of driving the data to, I'll call it, educate and inform the underwriter so they can make a better decision as they're looking at the entirety of the quote.

Great. And if we look forward, I'll say, 2 years arbitrarily, what do you expect to be able to do from a data and analytics perspective in 2 years that right now you can't?

So I think there'll be certain products that are homogeneous enough where risk selection insights can be relied upon with greater emphasis on the outputs of the data and analytic capabilities that we're building. I think Pete said it exactly right. It will complement the ability to have a conversation on more complicated business that isn't necessarily picked up in models.

And then lastly, I think that there's a boundaryless set of opportunities that will come from the emergence of what AI is doing within our company, more broadly, the industry. And we think it's only going to get better at perfecting cycle times, perfecting over time risk selection insights. We know through the investment we made with Sixfold and mea on our ingest function as just one example of our underwriting process, the cycle time benefit, the time it takes an underwriter to quote cycle time, the inherent ability to translate a number of underwriting rules around the quality of a submission is paying dividends.

And it's not more than a year that we've had this tool inside the house of AXIS. So we think there is a future positive potential on the dimension of expense rationalization and certainly predictiveness in outcome of underwriting results. We're not there yet. It's a journey, and we're going to have a lot of humility mindfulness of the expense that comes with this, but look for the returns in the short term as empirically as we can identify them.

Okay. That's helpful. If we -- I know you've put out very clear G&A guidance. I'm wondering, when we talk about investments in data and analytics and AI, et cetera, do we get to a point where the efforts are self-sustaining and we have a drop in the expense ratio because you no longer need to build anything, even though you need to maintain it. Is that even a reasonable way of thinking about this business?

That's a -- I think it is a reasonable way to think about it, Meyer. But I think as we think, say, 2, 3 years out, we don't know what's still coming, right? And so our expectation is we're going to need to continue to invest in these capabilities such that we can continue to enhance them to provide not only a better -- I'll call it this way, a better service experience because a lot of this is going to be serviced to the brokers. We'll be able to quote quicker, but it's also going to help the G&A ratio, but it should help growth, right?

So as we think about the investments we're making, it's a combination of better decisioning, better G&A, but then also better growth. And so we're kind of looking at it on all 3 dimensions as we invest in the data and analytics platforms we're looking at.

And if I'm understanding correctly, so you've got better G&A on an absolute basis, better growth further enhances G&A.

Yes, it's right. You get a twofer, if you will, right? You'll get leverage, but you should also be able to spend less money.

And the great thing is, it's already evidencing itself just in the improvement in our quote and buying ratios against our target classes, which goes to a part of what Pete was talking about. We're already clinically seeing the benefit of some of the tools that we've brought in to the house of AXIS to help our underwriters accelerate and get to more of the opportunity that otherwise they couldn't in the past.

And simply because of time.

That's exactly right.

Okay. No, that's helpful. And that's something it took me a while to understand not being a technology person myself. AXIS over the last couple of years has sort of adjusted its profile. The most obvious example is the withdrawal from property catastrophe reinsurance and some other smaller lines and then there's the LPT. Those are -- I'm going to say this, correct me if I'm wrong, largely played out in terms of the income statement impacts. How do those impact your capital flexibility, your investment allocation, the secondary ramifications of being a differently profiled business?

I'll start and then Pete can kindly complement. At the Investor Day presentation, we laid out really a strategic ambition and part of that includes the actions that you summarized. But importantly, we talked about how we viewed capital. We talked about its utility and focus. We talked about investing in the business, teams and product capabilities. We talked about how we work and bringing investments in technology, data analytics, AI and people, of course. We then talked about an opportunism mindset in respect to share repurchases.

And you've seen quite a bit of share repurchase from us. You probably saw a definition of a bar of M&A, inorganic. But just before that, you also saw a recognition that when you're a company that's producing 70-odd percent of your revenue in insurance increasingly and consistently that your view of how you manage your outbound reinsurance strategy has to be evaluated, and you've seen our response. We've retained more.

Secondly, you've seen our investment strategy maintain its discipline and its core focus, but have the leverage and the ability of being more of a predominant insurance company than a reinsurance company. Pete, I don't know if you want to...

Yes. Those are all very valid on how we're thinking about capital. I would say it does change your mindset a little bit when you think about capital, too, Meyer, because we've lost some of the -- which is where we wanted to go, the earnings volatility that we had when we were in that particular business. When we were, just as a firm overall, somewhat overweight property, and we decided we're going to play on the insurance side.

But when we think about it now and we think about capital quarter-to-quarter, if you will, the third quarter is still a cat quarter for us because we're in the insurance business, but probably the highs that used to be there or the lows that used to be there with the property cat isn't quite the same. So we can think about capital in a different vein.

You've also seen from an operating leverage point of view, we've been able to actually run at a higher operating leverage, right? We used to have to run pretty low because we had that high cat component of our premium. Since that's now gone down, we've been able to actually move up and get more operating leverage out of our underwriting segment.

That makes perfect sense. Are we done reshaping the investment portfolio? The premise of this question is that all else equal, reinsurance is longer tailed and on the property side, more volatile. As you withdraw from that component of it, you should be able to take a little bit more risk on the investment income side of things without disrupting the overall profile.

Yes, absolutely agree with that. And you think you've seen us over the last couple of years, we've actually increased the amount of risk assets we have. It's gone from about 14% to 17%, 18%. We have a margin there. We like to be at least 15%. Now we'll go up to 20%, even a little over 20%, but that's going to be based upon what we see as the opportunity there. So that team is evaluating what's the right time to go on risk, what will we do?

I'd say today, we're holding some powder dry. We're not exactly leaning in totally to the risk market, but it does give us the opportunity in the future when we see opportunity to take more risk on the investment portfolio because we derisked, if you will, a bit on the underwriting side.

Perfect. And then I have 2 related follow-up questions to that. You've been, I would say, in retrospect, very appropriately cautious on casualty lines. You did not lean into them in 2023, 2024. Where are we in terms of that market being appropriate? And how does that influence the investment strategy?

I think that the caution we bring to liability reinsurance will remain in effect certainly throughout 2025. When you think about the transformation work we've done at AXIS, the body of work within claims that we've undertaken, to give us the kind of confidence in the performance of our business broadly. The continued landscape of our cedents, the changes that they're making in their claims processes announced and otherwise shown through border rose. The caution generally on whether or not the new normal of the backlog that is virtually gone now, is there enough sort of pattern recognition of the stability? I think not.

And I think we'll maintain a fairly cautious reinsurance liability appetite for the balance of 2025. So how do we think about it? We think about it through the prism of our shareholders' lens, which is we want to be a very consistent earnings generator. We want to be as high performance as we can in the delivery of those results. And we want to be prudent in where we're placing our bets. And that's an area where we're going to be exceedingly cautious.

Okay. Fantastic. I'm looking around the room because it's probably the last chance for a question from the floor. And in the absence of that, I want to talk about debt to capital. Right now, your debt-to-capital ratio, I believe, below 20%. Typically, the specialty P&C space is in the 20% to 30% range. How do you think about that? What are the internal constraints and potentialities that the current below average leverage implies?

Yes. So I agree with you. It's typically in the 20% to 30%. When we look at it, we'll look at not only our debt, but we'll add our preferred to that. We got about $550 million of preferred. When you add that at 2Q, we're at 24.9%. So virtually right in the middle there. So that does give us the ability that if we want to move up, we can get to the high 20s. But right now, we're very comfortable with where we are. Right now, we've got very good cost on the cost of the debt, and we have nothing really coming due until 2027. We'll reevaluate it at that point. But right now, it's in a very good comfort zone.

Okay. Embedded in that, and I don't want to put words in your mouth, so I'm asking this, is that the 20% to 30% range is kind of right -- does that premise sound right to you?

That premise does sound right to me. Some of it does depend on why it moves. And we saw a lot of -- not only AXIS, but the industry kind of moved way up in the leverage when we saw interest rates spike up and we saw AOCI had a big negative component to it on unrealized. Well, there was a reason it went up, but that wasn't a fundamental business reason. So some of it is why you are moving around in that range. But we do feel comfortable when you just look at it fundamentally that you're in that 20% to 30% range.

Okay. And then I have time for one more question. I'm going to throw this in. You've talked about interest in inorganic growth. And I'm certainly not asking for specifics. But I'm wondering as -- if we can pretend for a second that there's one pricing cycle instead of the dozens that we actually have, as the pricing cycle decelerates, does that provide more opportunities for inorganic growth?

We love the organic story of what we've generated to date and feel highly optimistic about what our core business can continue to generate. And we point as evidenced in our second quarter half year results as evidence of that. Having said that, we don't live under a rock. We're observant to the external landscape. We'll continue to attach a very high bar to any such consideration.

We have a number of core strategies, and they were laid out at the Investor Day. We'll lean into that strategy. And if something meets the threshold, we'll act. But at the moment, we like our organic strategy, and we think it's meeting our shareholder interests.

Fantastic. And with that, we're just about at the end of our time. So please join me in thanking Vincent and Pete for a very informative session.

Good to be with you. Thank you.