AXIS Capital Bank of America Merrill Lynch 2016 Insurance - - PowerPoint PPT Presentation

AXIS Capital

Albert Benchimol, President & CEO February 10, 2016

Bank of America Merrill Lynch 2016 Insurance Conference, New York, NY

AXI S Capital

Safe Harbor Statem ent

Statements in this presentation that are not historical facts, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections, may be “forward-looking statements” within the meaning of the U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States securities

• laws. In some cases, these statements can be identified by the use of forward-looking words such as “may,” “should,”

“could,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential,” “intend” or similar expressions. Our expectations are not guarantees and are based on currently available competitive, financial and economic data along with our operating plans. Forward-looking statements contained in this presentation may include, but are not limited to, information regarding our estimates of losses related to catastrophes and other large losses, measurements of potential losses in the fair value of our investment portfolio, our expectations regarding pricing and other market conditions and valuations of the potential impact of movements in interest rates, equity prices, credit spreads and foreign currency rates. Forward-looking statements only reflect our expectations and are not guarantees of performance. Accordingly, there are

• r will be important factors that could cause actual results to differ materially from those indicated in such statements.

We believe that these factors include, but are not limited to, the following:

• The occurrence and magnitude of natural and

man-made disasters,

• Actual claims exceeding our loss reserves,
• General economic, capital and credit market conditions,
• The failure of any of the loss limitation methods

we employ,

• The effects of emerging claims, coverage

and regulatory issues, including uncertainty related to coverage definitions,

• The failure of our cedants to adequately evaluate risks,
• Inability to obtain additional capital on favorable terms,
• r at all,
• The loss of one or more key executives,
• A decline in our ratings with rating agencies,
• Loss of business provided to us by our major brokers,
• Changes in accounting policies or practices,
• The use of industry catastrophe models and changes to

these models,

• Changes in governmental regulations,
• Increased competition,
• Changes in the political environment of certain

countries in which we operate or underwrite business, and

• Fluctuations in interest rates, credit spreads, equity

prices and/ or currency values.

2

AXI S Capital

I nvestm ent Highlights

• Global leader in specialty risks with both insurance and

reinsurance platforms

• Successful track record confirms strength of

value proposition

• Excellent financial strength
• Executing on strategic initiatives designed to improve

relative returns independent of P&C cycle

• Building 21st century (re)insurance model to take

advantage of transformational trends in the marketplace

3

AXI S Capital

Hybrid ( Re) insurer w ith Strategic Flexibility

4

44% 56%

AXI S I nsurance ( includes AXI S A&H) ’02-’15 GPW $ 2 7 .9 ’02-’15 Underwriting Income $ 2 .3 ’02-’15 Aggregate Combined Ratio 8 7 % (4)

• 754 Employees(2)(3)
• GPW CAGR 2002 – 2015 = 10%
• Underwriting Profit every year

2 0 0 2 -2 0 1 5 Aggregate Gross Prem ium s W ritten

Consolidated AXI S ’02-’15 GPW $ 5 0 .0 ’02-’15 Underwriting Income $ 4 .8 ’02-’15 Aggregate Combined Ratio 9 0 % (1) AXI S Re ’02-’15 GPW $ 2 2 .0 ’02-’15 Underwriting Income $ 2 .6 ’02-’15 Aggregate Combined Ratio 8 7 % (4)

• 200 Employees(2)
• GPW CAGR 2002 – 2015 = 15%
• Underwriting Profit 12 of 14 years

($ in Billions)

(1) I ncludes corporate expenses. (2) Employee count as of 1/ 1/ 16. (3) I ncludes 105 A&H employees. (4) Excludes corporate allocations.

AXI S Capital

Delivering Excellent Shareholder Value Creation

5

(1) Diluted book value per share calculated using treasury stock method. 12/ 31/ 02 diluted BVPS is pro forma for AXIS Capital IPO.

Total Value Creation = Grow th in Diluted Book Value per Share ( 1 ) + Accum ulated Declared Dividends

$13.90 $16.74 $19.29 $18.34 $23.45 $28.79 $25.79 $33.65 $39.37 $38.08 $42.97 $45.80 $50.63 $54.08 $0.14 $0.64 $1.24 $1.86 $2.54 $3.29 $4.10 $4.96 $5.89 $6.86 $7.88 $8.98 $10.20 $13.90 $16.88 $19.93 $19.58 $25.31 $31.33 $29.08 $37.75 $44.33 $43.97 $49.83 $53.68 $59.61 $64.28 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Diluted BVPS Accumulated Dividends Declared

2 0 0 2 – 2 0 1 5 CAGR = 1 2 .5 %

AXI S Capital

• Total capital of $6.9 Billion

Financial Strength and Flexibility

6

• Standard & Poor’s “A+ ” Stable
• Moody’s “A2” Stable
• A.M. Best “A+ ” Stable
• Fitch “A+ ” Stable

Com petitive Financial Strength Ratings

• IBNR of 66% of net loss reserves
• Favorable reserve development in all years

since inception

• Total cash and investments of $14.6 Billion
• Average credit rating of AA- for fixed

maturity portfolio

• Debt and preferred equity to total capital

ratio of 23.6% Com petitive Capital Base Solid Reserve Position High-Quality, Highly Liquid I nvestm ent Portfolio Financial Flexibility

AXI S Capital

I nitiatives Designed to Deliver I m proved Returns I ndependent of P&C Cycle

Executing on Strategic I nitiatives

7 Quality of Loss Ratio Profitable Grow th Expense Ratio Reduction Optim al Capital Structure

• Improvements in

underwriting for incremental reduction and stabilization of loss ratios

• Enhanced data and

analytics supporting portfolio optimization

• Insurance initiatives

grew 30% in 2015, lowering their aggregate combined ratio by 4.5 points

• Disciplined action on

businesses with weaker long term outlook

• Fees from sharing risks

with strategic capital providers

• Elimination of $50

million in expenses by YE 2017 on track

• Seeking further

efficiencies to continue funding investments in profitable growth

• Incremental use of

reinsurance

• Increasing cessions to

strategic capital partners

• Increased common

dividend 21% in December, 2015

• Returned 110% of

capital generated from 2011-2015 (including merger termination fee)

AXI S Capital

Reducing Volatility of Underw riting Results

1 . Reported Loss Ratios exclude prior year reserve movements. 2 . Volatility I ndex represents the standard deviation in the annual plan. Standard Deviation of 2010 set equal to 1

8

Insurance

AXI S Capital

Proactively Changing Mix of Business

1 . I nsurance: Specialty Short Tail includes Marine, Aviation, Credit and Political Risk and A&H. 2 . Reinsurance: Specialty Short/ Med Tail includes Agriculture, Engineering, Marine and Credit and Surety.

9

AXI S Capital

1 . I nsurance: Specialty Short Tail includes Marine, Aviation, Credit and Political Risk and A&H. 2 . Reinsurance: Specialty Short/ Med Tail includes Agriculture, Engineering, Marine and Credit and Surety. 3 . Net Loss Ratios by Accident Year as of YE 2015. Include s Cat and Weather losses.

Business Mix Masking I m provem ent in Underw riting Results

Insurance Net Ultimate Loss Ratios by Accident Year as of Q4 2015 Reinsurance Net Ultimate Loss Ratios by Accident Year as of Q4 2015

10

AXI S Capital

Advancing Data & Analytics at AXI S

11 2 0 1 4 2 0 1 6 2 0 1 7

• Rolled out insurance portfolio

analytics with first deep dives in property and professional lines

• Built basis for marginal scoring

in reinsurance

• I ntroduced 4D risk evaluation

in Reinsurance

• Return
• Risk
• Correlation
• Duration
• Nearly doubled insurance

actuarial staff over 2 years

• Expanded deep dives to other

insurance lines

• I mplemented economic risk

database and event based modeling in reinsurance for surety and trade credit

• I mplemented marginal pricing

and risk based rank ordering capabilities across reinsurance lines (property and non- property)

• Commencing use of predictive

analytics with D&O insurance and moving to other professional lines

• I ntroducing predictive analytics

to insurance submissions to increase operational efficiency

• Expanding event-based

modeling to other lines

• Migrating economic risk

modeling across entire group

• Expand economic risk database

and event based modeling to professional lines

• I nsurance price benchmarking

complete across all lines

• Extending build-out of custom

event sets across all property and non-property lines

2 0 1 5

AXI S Capital

2 1 st Century ( Re) insurer

Risk Sourcing Risk Funding

Custom er centric approach to value creation Broad range of products and services Outstanding claim s m anagem ent Superior underw riters

• Underw riting
• Analytics
• Portfolio

Construction

• I nvestm ents

Effective and Efficient Platform and Processes

Risk analytics & Portfolio Creation

Form idable front end to identify and capitalize

• n opportunities

Preferred access to m ultiple sources of risk funding options

Ow n Capital Reinsurance Hedging Strategic Capital Partners

Duration Volatility

12

AXI S Capital

Conclusion

• Increasing relevance of the AXIS franchise
• Delivering targeted near and medium-term

return enhancements

• Investing in next-generation specialty

(re)insurer model

• Well positioned to seize opportunities in a

transitioning market

13

Question & Answer Session