AXIS Capital Holdings Limited (AXS) Earnings Call Transcript & Summary

Okay. Welcome back, everyone, to the Bank of America Financial Services Conference. If you're joining us on the webcast, this is the AXIS Capital session. Thank you for listening. Today, we have sort of a very unique situation here because we have both Albert Benchimol and Vincent Tizzio here, the outgoing and incoming CEOs of AXIS. I think it -- some of my questions will be directly trying to understand to some extent, like the role of the CEO and what it's like coming in and what it's like having had this experience. And so that's where it's going to be directed. If anyone in the audience has some questions, just raise your hands. But let me give you just a little background about both Albert and Vince. So Albert is President and CEO, and he's been in that role since May 2012, joined as the CFO in January 2011. Prior to that, he spent a decade -- leaving over a decade as the CFO of PartnerRe. I remember even earlier that the Treasury of Reliance [indiscernible] at the Bank of Montreal before that, and I didn't know that. As [indiscernible] of Vince, was just recently appointed to being that the CEO, he was brought into AXIS to the CEO of the Specialty Insurance and then the reinsurance portfolios, both of them. Formerly, he was the CEO of the Navigators Group, which was sold to Hartford in 2019, and you did a couple of years work at the Hartford before making this transition here. And prior to his time at Navigators, you worked with Zurich and AIG before that.

That's right.

And so we're very happy to have them both [ Europe ]. Let's just talk a little bit about the portfolio changes that have gone on over there. I mean I feel that AXIS reinvented itself a couple of times. This is clearly a period of reinvention. I mean I have some specific questions here, but maybe overall views about what's happening in 2023. And it's really been a -- I would say this phase has been maybe a 2.5-year change. It's culminating what's happening right now. How would you describe the changes in the portfolio to AXIS? And what AXIS is trying to bring to the customer today?

Do you want me to start?

Sure.

I think we're a very different company today than we were 5 years ago, right? So in 2017, over 50% of our business was reinsurance business. We had very large limits. We had a lot of cat exposure, and as a result of that, as you know, we suffered a little bit from the high cat activity over the last 5 years. But over these last 5 years, we've been very diligently transitioning to be more of a specialty insurer. Today, we are a company 2022. 2022, we delivered on a pro forma basis, 71% of our business was specialty insurance. I expect that in 2023, 75% of our business will be specialty insurance. Our limits have come down significantly. Last year, we exited completely, the property, property cat reinsurance business. And so we think of ourselves as a specialty insurer with very strong market positions in wholesale and E&S both in the U.S. and London and with a small but very focused reinsurance business that complements the risk that we take on the insurance side. And if you look at our results, very grateful that many people that we've met today talking about the fact then we're probably one of the best improved companies over the last 3, 4, 5 years in terms of improvements in loss ratios, improvement and consistency of performance. 2022, our 11% operating ROE placed us in the middle of the pack of well-performing specialty companies, but we're not declaring victory. We still got a long way to go. And in terms of the portfolio, we exited the businesses that we don't want to be in. We invested in the businesses that we believe will drive our future. And while we, of course, will respond in an agile way to market conditions, we like the portfolio that we have today. Vince?

I would say -- thank you, Albert. It's good to be with you, Josh, and meet you in person. I think we're going to continue the momentum that we've reported through 2022. In our predominant business, the insurance business, we are well poised to continue servicing the wholesale markets around the world, have a broad product array to complement the differentiated needs of those respective customer bases. Further, we're very well positioned out of our Lloyd's syndicate which has had substantial improvement over the years, even recognized in 2022 by Lloyd's as a top designated syndicate. We're very proud of that and their accomplishment. And then finally, we have a number of aspirations to yet harvest in respect to our data insights, our digital journey, and of course, talent. We continue to be an attractive organization to attract talent in our various positions, and we're excited about the prospects of that as well.

So if we talk about a mix of business, I often try and explain to investors not exactly the same thing, but they're trying to pick stocks, and you're trying to pick the most efficient portfolio of risks that you possibly can. So you say, look, we've repositioned the portfolio. You've repositioned the portfolio for 2023, 2024 is going to be a different situation in 2025. How do you think about making long-term portfolio decisions that this is where we want to play as a long-term general position in the market? Pricing is going to change under your feet while you're there versus the short-term changes around the edges, how do you think about what is the right mix of business over a multiyear period? How do we know the answers?

I think it ties first to our identity. We're a specialty underwriter and as a specialty underwriter, there's a defined set of products and capabilities that we think are necessary to bring to market, to service the needs of the customers we aspire to have in our portfolio. It's obviously buttressed by financial targets within our business model to make certain that we're delivering a fair return to our shareholders, while at the same time, delivering value to the various customers. And we think that, that strategy serves us in the definition of the products, the geographies and the qualifications of the teammates that have to support the underwriting and the servicing of that business.

Yes. Look, I think that there are big moves and small moves, right? As a specialty underwriter, you're always going to make small moves. You're going to respond to them what's happening in terms of pricing, loss trends and so on. But I think in terms of big moves, you also have to declare what you're aiming for. And I think the big thing that we've talked about is, a, we want to have a much more stable portfolio. We want to exit things that will drive large volatility in our results, and that's the exit from property cat. When you go from north of 50% in reinsurance to potentially 20% or less, you're basically also making a big move in terms of the fact that we are not a 50-50 company. We're not a predominantly reinsurer, we are predominantly primary specialty. Those things don't change. They won't change in '24. They won't change in '25. We basically have under 30% of our book in property. The rest is mid- and longer tail lines. Again, we like that, we like the fact that we've got a large exposure in international markets versus U.S. markets. All of those things are likely to stay because Vince will be in charge and I won't, but they're likely to stay. The -- at any 1 year will grow or shrink any line of business based on the opportunities.

Provided there's no seasonal North Atlantic hurricanes between now and June 1, you've materially reduced your property cat risk and after June 1, that will be a complete transformation, which lowers your earnings volatility by a significant amount. It also frees up capital. To what extent can you talk about your capital flexibility, given the less weight from having heavy PMLs weighing on the results?

So in terms of total transparency, our cat exposure going forward, we still have some Japanese exposure, the Japanese contracts to renew April 1. So we do have Japanese exposure through April 1 and to your point, we will have some exposure in the U.S., although not as much given that we've been reducing it going forward. I think that there is no doubt that getting out of property cat provides us with 2 benefits. One is the -- we're freeing up some capital, which we're very pleased, we'll fund ongoing growth of the specialty insurance business, and b, it probably allows us to position our balance sheet to one that can afford a little bit more leverage actually than that of a volatile reinsurer. So whereas in the past, we were targeting a leverage ratio in the mid-20s, we can probably handle a leverage ratio in the mid- to high 20s with a different book of business. And that will give us financial flexibility, and we'll give Vince and the team financial flexibility going forward to then make the decisions that are most optimal for the company and for its shareholders.

No. Look, AXIS has been around for 21 years. And I always felt AXIS in big way represent itself as a gross line underwriter. But there's always used for reinsurance. And we said 1/1, you buy reinsurance for your insurance book. And now that insurance is a bigger proportion. It's more meaningful that you use selective purchasing. Also, even though you reduce it, you are a seller, the 1/1 market just happened. You talked about your experience both as a buyer and as a seller of reinsurance on your 1/1 renewals?

Sure. On the insurance side, we have several covers, of course, at 1/1, not all of which renewed. But I can tell you that within our planning process, we had contemplated a changing landscape in our purchases, both in respect to the quantum of what might be available in the terms and conditions and ceding commissions associated. We have gone through those evaluations culminating in the 1/1 as you say, and we had a couple of our renewals go off. And in large keeping, they were as we had expected. We feel as though the rate posture that we have against those classes that were subject to the renewals are adequately contemplated. Albert gave really extensive detail on the year-end call of '22 around our reinsurance performance at 1/1. And I think we feel, together very good about how that concluded for the team, both in respect to, I guess, disabusing the notion that without property catastrophe, we couldn't be a viable solution for our customers. We think that, that was not shown as a showing within our portfolio. Secondly, we had highly selective standards on the new business that we wanted to secure within the REIT portfolio. And Albert spoke to that in the fourth quarter call as well in terms of percentages. And so I think net-net, we feel positioned well in responding to any changing -- incoming changes in our reinsurance purchases. We think that the market is still generally favorable and that we are able to generally pass our rates on to our insurers.

So if I look at the last few years, obviously, the underlying margins on the insurance business have improved dramatically at a period of time that for many of your competitors and peers, ceding commissions are going up on those placements because the market is more competitive, but you're a much more attractive partner for a reinsurer than you might have been 3 years ago because oh my God, look at the profitability of this business. How have the ceding commission changes affected the company at 1/1? I imagine you had -- it was a positive situation for a company like AXIS given the profitability of the underlying business.

I think net-net, that's true. In terms of the attractiveness of the underlying businesses that are going out, you're right. I mean, there has been improvements in the underlying loss ratios in many of these businesses.

I think it's a little early to make definitive statements. Most of our large quota shares actually renew April, May and June, and so we'll know then. We did have 1 quota share that renewed at 1/1. That was our cyber quota share, where we have a 60% quota share. Our ceding commission was down by 1 point in -- sorry, was down 1 point by 1 point. But that's basically it. We'll have the other ones. Look, at the end of the day, thank you for recognizing that the results are meaningfully improved on both a gross and a net basis. I think our reinsurers see that. I think we've got strong reinsurance partnerships. We've already been working very diligently with our brokers and reinsurance partners to start laying the groundwork for the renewals that we're going to see coming up in April, May and June. And right now, we feel confident about our ability to renew our reinsurance on acceptable terms. Obviously, in a number of lines, we expect to pay a little bit more. But I think very critically is -- and Vince, you can speak to that, it's our expectation that we will be able to pass on any incremental reinsurance costs to protect our margins.

And I think all the way back to [indiscernible], turned over the management over at PartnerRe. And obviously, you came in to access and there was a management turnover then you are no stranger to it. What's your experience on successful management turnovers, Albert? And what kind of advice do you have here? Does this change right here with you and Vince changing the roles?

Well, the most important thing, I think, in any transition is making sure that you've got an understanding before, during and after going through it, I think we've practiced truly best practices in terms of transitions. We knew strategically what we were looking for in our next CEO, right? So we've spoken about our transition to a company that is primarily a specialty underwriting insurer, number one. Number two, in speaking to our producers, they've all told us the same thing in terms of the fact that historically, AXIS was a large accounts, large limits, large premium organization. We've taken the premiums down. We've taken the limits down. But there is huge opportunity in small to mid-market accounts that we had worked in but had not really fully developed. And the encouragement that we were getting from our wholesalers, in particular, was that there was a significant volume of small-to-middle market account that was available to us if only we could expand our appetite. So we knew that we wanted a strong underwriting executive, a specialist and somebody with a strong track record in small specialty business because that would be an avenue for growth for us. And after a number of years of looking at that profile, so we were hiring to a profile. We identified and found Vince and we're very fortunate in convincing him to join AXIS. Secondly, we took the time to as much as we thought we knew him and as much as he had great profile, it's always better to know who you're dealing with. So he's been with us since the beginning of 2022. We saw him interact with our employees, with our brokers, with our Board. We saw that, his values, his work ethic, all aligned with what we were looking for. And so I think once we had that, it was then a question of making sure that we had an appropriate transition period. Transition periods are better short than long. And so I think we announced it in December. It's going to happen in May. And after that, I will remain to support Vince in any capacity that makes sense, but he will be the CEO. And so I think everything has really worked out the way it should work out.

Given both your experience at AXIS, Albert, [indiscernible] Navigators, what sort of things are harder to change you would hope that you say, look, I have a vision and you were going to try and push that vision into the company that you're trying to guide? What things are more stubborn and harder to change and what things tend to change with the direction, desire and whatnot?

I think the culture at our organization or any culture or any organization underpins the ability to effect change that you strategically think is in the best interest of the company. I think we at AXIS have a culture that's adult-like, collaborative, wants to outserve, outearn against those that we compete with. And I think that in terms of difficulty, I think it's less about difficulty, Josh, and more about offering an explanation of what the benefit will be, why we want to get there in whatever respect, whether it's operational transformation, deepening our consistency and earnings generation, harvesting the betterment of our investments in data and analytics or digital, I think those are things that we're really excited about. So I think our culture allows for a lot of this work to continue, and this work proceeded certainly my joining the company, and I think it's just been added to.

Yes. If I can take a broader view, I think that the things are always difficult to change our culture and customer and broker perceptions, right, and appetite to risk, which is tied to culture. I'd like to believe that we have continued to evolve those over the last decade that we've refined them to a way we think there's real clarity in terms of our risk appetite. I mean you've heard us talk about it now for 5 years, very publicly. We've evolved our customer relationships to a position where they're very, very strong now. And I'd like to believe that Vince is taking over a company that is probably in the best shape it's ever been. It's got a long way to go still. But at the very least, I think that this is about moving forward and building on the progress rather than having to fix something.

So you mentioned data analytics and technology. It's something we don't really get to see at all as investors, we don't know it. I mean, in 2001, when AXIS was formed, I feel there was an idea that there was a huge advantage in being a start-up that all the legacy systems can be built from scratch. And I don't know, Al, when you came in, in 2011, 2012, I don't know whether that advantage felt any different than the technology at PartnerRe or whatnot, which was started a decade earlier. So now you're going to be the third CEO of the company, you're no longer spring chicken any more access. I mean you were a legacy company in some ways. And of course, if you could go back in time, you would change things differently, to always spend as little on technology as possible, but exactly what you need and don't -- but are the systems as competitive as any systems out there in the marketplace today? Are there -- you need to make more investments in the future? How does that sort of perfect technology thing keep pace with what you need to be the best of what you do?

We've invested like over $100 million, I mean, every year in IT, right? So it's our largest single line item. And we've made all the changes that are necessary to stay up to speed. So today, the good news is that [indiscernible] is that the work has been done. So we've got Duck Creek in place for our insurance system. We've got 6 in place for our reinsurance system. We've got Oracle in place for our financial systems. We've got Workday in place for our HR systems. So we've got all the systems in place. We continue to upgrade our systems. We just put in a brand-new reserving system in place. So we have insured on investing for the right technology. And I would argue that one of the opportunities in front of us is that we have a very, very high operational leverage available to us. We could grow our top line significantly without making any meaningful improvements in our expenses. And in 2022, our dollars of expenses in G&A, for example, were up about 1/4 of what our top-line growth was, and we saw meaningful improvements in G&A. And that's an area, I think, for ongoing opportunity for AXIS to grow in this market where we think we can grow profitably and get the operational leverage that can help us have a long-term positive impact on our expense ratio.

So over the past 4, 5 months, a number of reinsurance stocks are up fairly dramatically Renaissance Re, [indiscernible], 2x book [indiscernible] And I was -- as I was talking over what I might ask with [indiscernible], we're not really a reinsurance company anymore. If they think about W.R. Berkley and James River and I said fine. So I look at those companies, [indiscernible] RLI trades at 4.5x book and right now, AXIS about 1.1x book. And there's a lot of opportunities for you to put money to work in the business at what you perceive as very high returns. But when you look at where your stock is trading, what you think the potential is and when you look at the opportunity of deploying capital into return to shareholders at a very attractive discount to peers versus putting money to work in your business because now is the time because the returns are attractive. How do you balance those 2 sort of antagonistic impulses for what to do with capital?

Do you want to start?

So I think 1.1 is probably wrong, but we're still satisfied with our stock price. But I think that what really matters for us.

[ SAOCI ], maybe.

Okay. I think we're still a little bit above that, that's fine. The -- I think the thing that matters is what is the right strategy for the long-term value creation of this organization. And I think we have a unique opportunity in the near term to take advantage of our momentum in the market. We've got outstanding relationships with our customers and producers. The market still has meaningful opportunity for profitable growth. And I think there's an opportunity to build greater moats around our business and further reinforce our positioning in these markets, number one. But number two, growth will provide an avenue for a meaningful reduction of our expense ratio going forward. And that is something that we can benefit from every year. If you look at our results, and I'll just use specialty insurance since it's the bulk of our business. We have very attractive loss ratios in our business. I think last year, our insurance business came in at about 52%, which is one of the better loss ratios. But we are -- but when we look at our overall numbers, we recognize we could benefit from dropping our G&A by 1 or 2 points. And we think that we can do that using the operational leverage that we have with our platform. And so getting us from an $8 billion company to a $10 billion company, will make us a stronger company. It will make us better entrenched in the markets where we're already well positioned, but importantly, will give us an annual benefits in our G&A ratio going forward, which I think will ultimately help the profitability and god willing to shareholders.

So let's have a few lines of business. You are a go-to-market for cyber, huge rate increases over the past few years, maybe moderating a little bit, but the growth profile long term for cyber especially in the small-middle market areas, very, very strong. Where is rate adequacy today? How much share can you take given what you already have this exposure? Do you take more share on a gross basis, but maybe you see that out because you know what the price is and are happy to sort of faculty is the right term, but maybe you say, we'll write it. And because there's an arbitrage there. What is the opportunity for AXIS bigger than they already are in the cyber market?

Albert and I described cyber as a line of business like many that we have humility towards. We like the design of our product. We like the governance in our risk selection processes. We call it hygiene internally. We have a scale business. As you know, we have a wonderful practitioner leader well regarded globally. I think that the prospects of continuing to meaningfully participate in the class, it has been shown. I think that the business has had compounded rate that we reported on the fourth quarter well over 130-odd percent over these last several years. So the runway of growing is not the challenge. It's doing it measurably, it's doing it with the same level of premium adequacy confidence that we have and to make certain that we're ever mindful of the developing views of risk in respect to the tail. And I think we feel pretty good about where we are, the expectation of the line that we have and certainly with the team that leads it day to day.

Yes. Look, cyber, you heard us say this, we think it's going to be one of the major lines. There's -- in a digital world, I don't see how everybody in the world doesn't need some form of cyber insurance. And we feel very proud of the fact that we are a leader in the world. But one of the reasons we got out of property cat is we wanted to make sure that we had better control of our volatility that we were thoughtful about where we were taking risk and the tail scenarios. And I think we have to recognize that there are still some catastrophic tail scenarios in cyber, such that we want to address limits management, exposure management in a way that makes us comfortable that we're comfortable along a wide range of potential outcomes. So we have absolutely the ability and capacity should we want to, to write meaningfully more cyber. Right now, our appetite is guided not by adequacy because I think the price is adequate now, but it's by the size of the tail that we take. And we're comfortable with the size of the tail that we have now, we can certainly grow it as we grow the rest of the book. But we don't want to have an oversized tail to cyber in the very same way as we don't want to have an oversized tale to natural catastrophes.

I think it totally makes sense. And so look, I'm trying to understand what that tail is. I don't know if we've seen the cyber cat event. And I kind of dovetails in the same theme. I want to talk about terrorism, another line of business for your go-to market. Do we have enough information about what the loss profile looks like for cyber or for a line like terrorism that we know whether the pricing is adequate? Like, how do we envision that the terrorism cat or the cyber cat event that we're worried about that you're trying to manage against?

That's where the term humility comes in, right? So there's probably 7 very highly respected models out there, including the ones that we twitch on our own. And they all have different perspectives. Those are also supported by the RDS to the disaster scenarios that go through it. But we have to recognize that. It's a 20-odd-year-old line of business. It's evolving. We're not dealing with just happenstance. We're dealing with people who are looking to cause harm, and so for all of those reasons, I think that the scenarios, and the modeling have a pretty wide range of outcomes. I think that over the last 18 months, the spread of that -- those ranges has come down as we learn more about the book of business. As the construct of the wordings improve, but there's still some range, and it's because of that, that we think it's really important to make sure that we manage the tail exposure.

So I mean -- and look, I think this can go a lot of ways. When I first started learning about cyber, let's say, 10, 15 years ago, it seemed like the big risk was cyber breach. Somebody stealing information seemed to be what you were purchasing the cover, and now it feels like ransomware is really where -- are there -- what are the -- what does it cover? Like are there other things that have not been tested that are in the coverage that are -- that still -- so far the hygiene has managed or maybe the loophole -- and I want to link it to terrorism a little bit because like cyber, terrorism is that a terrorism cover? Is that a cyber cover? Will there be some sort of gap where it's -- we don't have responsibility because that was a non-state actor who was engaged in -- when you worry about all these things, like what are the risk factors we need to think about in both those lines that aren't necessarily being fully contemplated right now?

Two different classes. I mean, there's certainly other exposures to loss in the cyber offering. You read about fishing, PH, right, a lot of fishing matters out there as a more emergent exposure in terms of what you're reading about. It's been around for a long time, oftentimes not reported in public disclosures, but it's an exposure loss that is addressed under a cyber form. I think terrorism is a different circumstance, there is data to support.

I'm a lot for buildings right, right? So we're really talking about building couple of...

[indiscernible] and things of that sort. So I think we underwrite them in different ways, but there's a commonality to the extent that you view the catastrophe event differently defined, whether it's as horizontal could be reasoned between terrorism and cyber, of course. But I do think we have separate standards that govern our tolerance of risk and ultimately, what we're willing to take on a catastrophe basis.

I think on an individual risk basis, I think they're both reasonably well structured and priced issues aggregation and obviously, terrorism is one that you manage both with a limited basis and a zonal aggregation. I think on cyber, we do get the benefit, if you would, of the war exclusions, the infrastructure exclusions. So to the extent that something can actually affect a wide swath of the economy through the grid, for example, we do have a language that says that's not covered. So that's at least 1 protection. The other thing is I believe that this is a line of business that's also evolving a lot and I think to the benefit of the industry, we'll get smarter, we'll get better wordings over time. I expect that in 2023, '24, we'll see much greater participation of the capital markets. ILS markets will provide more capacity, more cat capacity. And that will all be to the benefit of both the providers of cyber insurance and the customers of cyber insurance because if we have more confidence in our ability to manage the tail, we'll be happy to provide more capacity to our customers.

So moving away from low frequency, high severity coverages, let's go the app and expansion to high frequency, low severity coverages and talk about your presence in the PET market. How -- I don't -- when did AXIS get into PET insurance? The data, I guess, is widely available in some ways to learn how long does it take for a company like AXIS to this like here's the underlying data, we have a product that we can sell -- how long does it take to become a market player in something where there's a lot of data available and it's a matter of you becoming adept at underwriting that information?

So we were evaluating and studying this line of business with our partner for 3 years before we wrote our first policy. And we've been monitoring what they've been doing and their capabilities, and this is a line of business that's going...

We say partner. I know you have another underwriter who you work with, but there's a marketing company, and there's an underwriter who you share risk with.

Yes. It's PET insurance that we're doing partnership through who's marketing it for us. The data is incredibly granular to the point where we have data by breed of cats and dogs and animals, by veterinary costs by regions and so on. And so we feel that the data that we have is both timely and sufficiently granular. It's a line of business that you've got us down on top of. The good news is the trends are very easily observable because you get the bills on a monthly basis. And what I can tell you is 3 years of studies, a close partnership and our results to date to 2022. And as we look into 2023 have been better than our initial expectations. But like everything else that we do, we've got to stay on top of it and make sure that we monitor loss trends. But for the moment, experience has been good for us. And it's one that we look at, we'll probably write over time, north of $100 million. I mean it's still going to be a small part of our overall book, but we think it's one that will make a positive contribution to our overall book.

And so that's recorded in your accident and health lines in your underwriting. And is that similar to what -- how accident and health has been underwritten at AXIS for a long period of time? You've created quite a business there. And when we think about barriers to interim, I mean, pet is obviously, it's a very competitive market. But accident and health, I feel like sometimes international location has helped in barriers to entry and whatnot, what sort of barriers to entry overall for the broader accident and health business, which is very profitable and formidable at AXIS. To what extent are your competitors kept from being able to come into your markets?

Thank you for recognizing that. And obviously, in our business, there are no guarantees and no ownership of any market. And so you earn your position every day through your service, your ability to work well with your producers, with your customers. And that's really what we do. We've got -- one of the things that I feel incredibly proud of is we have leaders with strong market reputations who've been with us, in some cases, from the beginning of the line. So Jay Hamilton, who runs our insurance A&H business, has been with us since 2010. Rich Phillips, who runs our A&H reinsurance business has been with us since 2012, right? And these teams have been there. They've got lifelong relationships and we just keep working them, and the other thing that we've been doing within AXIS, again over the last several years is, I think we've done a much better job of coordinating our distribution management such that we're leveraging our relationships with our producers to see more opportunities. So as you see more wholesalers buying A&H distributors, for example, now we can leverage these relationships and say, look, we do all this great stuff for you here, how about that? So we've seen some A&H opportunities come to us as certain A&H producers have been acquired by some of our wholesale relationships. There's a better management of distribution going forward so we can leverage that, too.

Changing gears a little bit. And maybe if Pete were here, he might chime in on this one. But go back to the beginning, a bunch of 2001 startups, including AXIS and reinsurance was attractive because you could set up a business where you do all your business on the island of Bermuda. And most of these companies were largely tax-advantaged. And although perhaps the transformation to be an insurance company is the greatest at AXIS. The other peers of yours have also been sort of trying to pivot to insurance over time. But I think that your insurance exposure as a percentage of overall is greater than most of those very same peers. Yet you've managed the tax situation better than some other companies who have got higher tax rates now than they did in 2002. Your tax rate is still pretty attractive and competitive. I don't need to know all of the inner workings, but I do need to know whether it's sustainable. And given all the changes we've seen in the past 5 years, I guess, in the U.S. tax rate and tax code, can AXIS continue to be a low-cost tax provider for the kind of coverages that it writes?

So the usual caveats about tax rates is that the taxes we pay are based on the geography of our income. And so we tend to model based on the geography of our income, and Pete Vogt tends to guide people to something around a low double-digit, 10% type of average tax rate. Sometimes it's lower, some quarter -- well, the fourth quarter was higher, but average has been that, right? And so it depends on the geography of tax rates. Some countries are going to raise their tax rates, which means that we'll pay more in those taxes. But at the end of the day, we don't control what countries will do with regard to their old tax rates. And ultimately, we do have to follow the business where it is. But I do believe that our model and the way we manage it and our Bermuda base is such that it allows us to whatever it will be for others, we should be on the low end of the scale. So we can't guarantee what the number will be. In any 1 year, the geography of our gains and losses will be different. But I think that we do have as good an organizational structure as we can and the numbers will be what they will be, but it ought to be on the lower end of the scale.

I wish you best of luck in this transition. I want to say just to [indiscernible] Albert's around until May. And so we have another quarter, and thank you really much for the time. It's been enlightening and thank you, Albert for AXIS being here, and thank you.