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

Good morning, everybody, and thanks for joining us for our Global Virtual Specialty Insurance and Reinsurance conference. This has been an annual event for, gosh, I think this is the 13th year, 12th or 13th year we're doing it. We're starting off this morning with a fireside chat with AXIS. Just so you know if you've got any questions you'd like me to ask during this fireside chat please e-mail me at [email protected]. I also think there is ability to do it at the lower right-hand corner of the screen if you got a question, and we'll get an e-mail me too as well. So let's begin. With us today from AXIS, Vince Tizzio, who is the President and CEO. We've got Pete Vogt, who's the Chief Financial Officer; and we've got Cliff Gallant who is the Head of IR and Corporate Development. Thank you for joining us this morning, gentlemen.

I thought the best way to start off here is last night, you announced a pretty large LPT transaction with Enstar. And Vincent I'm wondering if you could tell us a little bit about why you're doing this transaction? How did it come about? Strategically, how is this going to play into the AXIS story?

Brian, good morning. Thank you for having us. So as you indicated, last night, we announced a strategic decision that culminated in a transaction loss portfolio transaction with Enstar. This decision really culminates the actions that we've been embarking on for the last couple of years. As you know, back in May at our Investor Day, we really pronounced our strategic ambition to be the leading specialty underwriter with a leaning toward our insurance business. We've done that fairly convincingly throughout the first 9 months and our year end of 2023. When we thought about our balance sheet, however, more than 50% of our reserves or 50% of our reserves were in reinsurance. And we thought that, that was an odd sizing to a portfolio that no longer resemble the complexion of our reinsurance strategy. And so we went to market with our reserve pool, and Enstar and AXIS had a meeting of the minds, both on a structure of a loss portfolio transfer where we retain the claims control, importantly for our cedents to have the confidence that we'll continue to administer these claims in good faith. At the same time, a recognition of the health of our reserves as evidenced by the $60 million that we can describe around retrospective accounting rules and also importantly, to bring balance between our underwriting strategy and our balance sheet, which was critically important for us in our continuing long-term view of value creation for AXIS Capital.

Great. That's helpful. And then, Pete, maybe I was hoping that you could maybe outline some of the details of the transaction value of reserves transferred, covered lines, covered business, what years, all kind of some of the details would be really helpful.

Yes. Thank you very much, Brian, and thanks for hosting us this morning. I'll go through some of these details. A lot of this, you've read in the press release, but I'll give you a little bit more details. We're doing this off of our September 30 balance sheet. So if we look at September 30, we had about $4.9 billion of total reinsurance reserves at that point. The perimeter that we talked about is about $3.1 billion of that. Now that represents 2021 underwriting year and prior, so '20, '19, '18, going back, and it's all of our lines of business associated with reinsurance from those underwriting years except 3 little bits. One is our mortgage business, two is our engineering business and then three is some older reserves we have from the Novi transaction we did back in 2017. All total, those 3 cohorts add up to about $240 million. So it's a small amount. So for the most part, 2021 underwriting year prior we are now going to share 75% with Enstar, and we will be keeping 25%. So 75% of the $3.1 billion I mentioned is about $2.35 billion. That will be the amount of reserves that we will be transferring to Enstar. At closing, the amount of -- the premium we're going to pay on that is $60 million less than the reserves we have on our books. So that is what we talked about in the press release. We do have a $60 million gain with that. According to retrospective accounting or these reinsurance type contracts, we'll amortize that $60 million gain into our income over the expected lifetime of the reserves. That's all that happen. We expect we need regulatory approval from a couple of regulators. We expect to get that in the first half of next year. So we think about it, it's the really essentially the entire book for reinsurance 2021 and prior, all lines of business, we gave it all to them. When we look at it, the predominant part of those reserves in those years really do come from liability, professional lines and motor. So those 3 cohorts add up to about 80%, I'll call it, of the $2.35 billion. So those of you thinking about lines of business, you can see it will be all of our SEC lines other than those 3 product lines I mentioned, and that is up to about 80% of the deal. There is a 140% loss cap on this. So the perimeter is $2.35 million (sic) [ $2.35 billion ]. So we've got a quarter of about $940 million of protection above that $2.35 billion that's being afforded to us by Enstar. So again, that attaches right at the reserve mark. And so we feel very good about this -- for those reserves to come back to us would need to be a very extreme event. I think if you got any more questions and if I left something out, let me know, Brian.

Yes. I guess one thing is you're obviously going to be transferring a bunch of invested assets over to Enstar, and that's going to hurt from an earnings perspective. Maybe you can talk a little bit about the EPS impact and what offsets there could be to the invested assets being transferred?

Yes, that's a great question. So obviously, we've looked at this. We will lose investment income. As we look at it for next year, we'll start actually providing them interest from day 1 in 2025. So we think it's going to equate after tax to about $0.80 a share, and that will impact us in 2025. And after these reserves, after we get regulatory approval, and we're allowed to get the reserves off of our books or at least get the credit, I'll call it, from the counter party, we think this will free up at least about $500 million of capital. We've talked to you all this year extensively since our Investor Day about our uses for capital. We'll continue to look to grow our business organically to continue to invest in our business, but we think we'll be able to deploy that capital in such a way that by getting into year 2 of the deal, we'll be able to make this fairly EPS-neutral.

Great. That's helpful. And then...

And I was going to say on the positive side, that $60 million will amortize in the income probably over about a 3- to 3-year duration on average. These reserves, you might think our long-tail reserves are going to be longer that is true. But when you think about 2021 underwriting year prior, the tenor on these reserves is fairly seasoned already. So we look at it really is about a 3- to 3.5-year tenor on it. And so we'll be amortizing that $60 million into income, and that will offset some of the lost investment income over the period.

And Pete, just a finer point on the EPS, it's up to $0.80 in '25, likely offsets depending upon when we obtain regulatory approval minimally and so that would be the worst case scenario in '25.

'25.

Got you. Got you. And on that, I mean, as far as the offsets, are you thinking buybacks? Are you thinking M&A? Kind of how are you thinking about deploying this $500 million of capital?

We've laid out fairly explicitly up to this point, Brian, from the Investor Day forward, the use of capital. And in chief, those component parts that we've detailed, the continued team lift-outs, the continued new business generations, the how we work investments in data, infrastructure, target operating models, data and analytics will continue. Further, we're also leveraging those capabilities to realize our profitable growth ambition. And you've seen as one example, in May, we announced over -- about $600 million of new and expanded initiatives that we were embarking to achieve in '24 alone. Those take capital. They take time. We'll report out in the New Year the degree to which we've succeeded in that effort. And then further, Cliff has been pretty clear spoken about the high bar we attach to M&A. And finally, as you know, we have an authorization from our Board. We've reported through the third quarter what we've absorbed against that authorization. And those will be the predominant uses of our capital.

Great. That's helpful. And then I guess another thing here, both Vince and Pete, you've previously expressed a lot of confidence in your reserve position post the charge you took at the end of 2023. What does this say about that reserve charge? Are you still comfortable with your reserve position? And maybe also kind of intertwine a little bit on the primary side and what you're seeing. A transaction like this obviously helps protect you on the reinsurance side.

So firstly, as we've said, this is a strategic decision that aligns our company and the profile of being a specialty underwriter with an emphasis within its insurance business. We've achieved that over the last couple of years on the front end, our written premium dispersion. We're now doing the same in our balance sheet with respect to our reserves. Secondly, we maintain our confidence in our reserves, the health of our reserves, the diagnostics that we use to support that language. Further, we have an opportunity to lean into our profitable growth ambition within insurance, and we are doing so in a very prudent and progressive way. We've done that despite the fact that we've been reshaping parts of that portfolio of primary casualty and cyber to just name 2 in '24. And so we look forward to producing our results for the year-end in the fourth quarter. We'll give more commentary around the health of our reserves for the organization in total. But Pete and I can attest to you today that we feel very good about our position and the actions that we undertook at the charge.

Makes sense. And then maybe, Vince, also, can you talk about in conjunction with this transaction, what does this mean about your strategy in the reinsurance space? I know you've kind of outlined it, but maybe give us any change in thoughts there.

No, we like the ability of our team to lean into the specialty lines within reinsurance, and we've said many things around the reinsurance business. First of all, it's a complement to our predominant business of insurance. Secondly, it's a bottom line focused business unit with a heavy emphasis within the specialty component lines that form that business. We reported in the third quarter the substantial progress made in achieving new business written premium in our specialty lines, the retention of our existing specialty lines reinsurance business. And we've had a very clear and consistent view of risk in casualty and professional rate, where we said we're very cautious. We are looking very carefully at the health of our underlying cedents, the data and the hygiene of the data that we're receiving, and we have not been growing that business through the first 9 months ex rate. So the purpose of reinsurance continues to satisfy a bottom line focus with a specialty leaning. And I would note to you by way of example -- 2 examples in 2024. You know that we've been downsizing our delegated insurance business in 2024. We've leaned into the reinsurance business. We've done so with loss caps. We've done so without any increasing aggregation, and we like the premium adequacy and the hygiene of our cedents that are contributing to that growth. Similarly, we took a decision to lean into our credit capabilities within reinsurance, and we've done so in a very successful, thoughtful way with what I might add a class that has been historically very profitable to the company in total, led by very strong subject matter practitioners and viewed by our marketplace as value add. So the reinsurance proposition is alive and strong. And we're fine with where we are with respect to the results through the first 9 months.

Great. And then maybe let's pivot just a bigger picture here question. Last 18 months, a lot of change has been going on at AXIS, a lot. Is this repositioning that we've been seeing in the organization complete yet? What's still to be done?

Yes. We feel very good about the progression that our team communicated at the Investor Day. We have all been working with pace to your question around executing on our strategy. This is yet another step toward that end of positioning our company in its identity, in its value around being a specialty underwriter with a leaning toward its insurance franchise which we're exceedingly proud of the financial performance of that business unit through the first 9 months. In terms of going on into the journey in terms of change, look, we're in a much more stable place than we began in 2024. We've reshaped the underwriting businesses requiring change resulting from our reserve action. We've got new data and analytics that are giving us a contemporary view on the health of our portfolio. Pete and I together have been commenting on premium adequacy confidence that we have across our company's portfolio, the positioning of attracting talent with new skills and capabilities, the great work being led by Ann Haugh in addition to her duty around reinsurance as our leader in how we work. And so we feel very good about the positioning of the company, the health of the company's balance sheet, the strategic clarity that we're bringing to our brokers. And as you know, in our most recent external Net Promoter Score survey with brokers, we scored our highest results ever from our intermediaries, the people that we go to, to earn business from, to retain business from. And we're very proud of what the front end alongside all of our claims, actuarial technology teammates and operation teammates have been doing to support our profitable growth ambition.

That's really helpful. And then anything specific for 2025 that we should be thinking about? What are kind of the big events, big strategic steps we can expect in 2025 out of AXIS?

I think what Pete and I have said thematically is, number one, how we work as a multiyear campaign. We don't have a one-and-done set of actions related to enhancing our operating platform. There are substantial investments that we'll continue to make, all of which are aiming towards optimizing our risk insights, making us a more efficient company, delivering on our 11% GA ratio by '26. Second, we have made substantial investments in our North American platform. We've reported those investments in the dimension of product, people and distribution throughout the year, team focused on the profitable growth journey in our insurance business within North America. And then finally, we're in the talent business as much as being in any other business. And of course, we'll continue to attract new skills and capabilities to complement our underwriting strategy, and we'll do so with a strong balance sheet, a strong capital position, a very engaged Board of Directors in support of its management team and a team that's come together now as a newer team over 1 year working together for a common cause without serving our clients and meeting the needs and expectations of our distribution partners. That's our ambition.

Great. Pivot over to some of the kind of market conditions right now. If I think about what's going on, a lot of conversation about the challenging kind of tort inflation environment. Maybe you can talk a little bit about what you're seeing with respect to casualty trend, tort inflation, how are you thinking about it? What are you including in your loss picks for casualty as you kind of price your business and think about establishing picks?

Yes. Thanks, Brian, it's Pete. I'll take a first start at that. We're continuing to see social inflation through the year. I'd say real important to note that our loss picks are consistent with the inflation that we're seeing. And so we're really -- so far, what we've seen is consistent with what we did last year to our casualty reserve but also what we're actually putting into our pricing and our loss picks in 2024. And with that, we continue to see trend being elevated currently. It's in the high single-digits type area. So we really are pushing and we've been reporting, getting pricing in the casualty space, especially the liability space into the double digits. We saw it in primary casualty in the third quarter. We saw it in excess casualty throughout the year. We've seen an acceleration in that pricing actually in the third quarter. We think that's prudent and needed in the industry, and we expect to see that continue as we get into next year. On the professional line side, the rate decreases are lessening, I guess, I'd say. We're waiting that market to turn. I think we've told you we're very -- we don't think the public D&O market is price adequate at all. We've really taken back from that market. That market is now, for us, less than 3% of our professional lines portfolio, our financial lines portfolio that is. So we're seeing more opportunities, say, in the not-for-profit D&O space as well as the other areas in financial lines. But we still think that public D&O is not the place to be. And then cyber, it looks like the rate decreases that started this year have come back a little bit, but they're not increasing like they were last year. We've done a lot of restructuring on cyber. We talked about that this year as we've left our delegated relationships. I would just point out that, that retooling, I call it, of cyber is going to continue into 2025. It takes a little while for those relationships to end. But I would say on the primary casualty side where we did do a lot of retooling this year, even though we were getting rate and that was based upon all the learnings we got out of our review last year. That will be substantially done this year. So as we go into '25, we'll look at primary casualty being an area where as long as the rate and market conditions continue to be at least a trend when we're looking at pricing, we may be able to see primary casualty actually grow as we get into '25.

With its new underwriting appetite, of course, we're not going to be a major have market or the RBT segment. But as Pete says, we've done a heck of a job at reshaping -- the team has done a heck of a job in reshaping that portfolio. Well over $100 million was nonrenewed and that has not been easy. We were very clear spoken with our wholesale distribution partners around that effort. And it has been a lag on the growth that we actually explicitly stated in the third quarter call. So we enter '25 with a very healthy portfolio across our business. It's premium adequate. We will use our leverage of being domiciled in the most favorable specialty line markets in the world. We're leaning into North America, in particular. Our mix between short and long tail is strong. And we like the diagnostic work that we've done in our claims organization to give us the kinds of insights that will support our intermediate long-term underwriting strategy.

Vince, maybe you could talk a little bit also about your strategy to kind of continue to move into the small, middle kind of size specialty, call it, E&S type businesses. Where are we in that kind of where we are?

It was a thought uttered in June of '22. I think my predecessor mentioned that we were embarking on an effort around that trying to capitalize on some of my historical background and training around it. And lo and behold, here we were in the third quarter of 2024, and that lower middle market business contributed in a meaningful way to the $1.5-odd billion that we produced in our insurance business. And why did we pursue that segment? It wasn't to leverage the background of some of us. It was more importantly, being responsive to the needs of our clients. It was being able to leverage existing product capabilities that we have to be responsive to our customers' needs. And finally, it's a vast universe that we think is going to continue to grow. It has a profile of loss as well as retention that is of appeal to us. And we're in the early innings of what that proposition can mean for AXIS, both in its order of magnitude of size, but also profit contribution. The early innings reveal confidence around the strategy that we're leading, and we'll reasonably make more investments in 2025 to support our profitable growth ambition there as well.

Great. That's helpful. It's been, let's call it, a little over a month since the third quarter call. Maybe you can talk a little bit about how the market is developing? I just got back from Europe and was in London and you're hearing about the D&F markets in London getting particularly competitive, particularly for large accounts. Are you seeing that kind of -- what are you seeing on the property side right now and then maybe pivot over to casualty?

Yes. So I think there's a compelling truth to the notion that in the London market, there certainly is a receding of rate attainment in the property business generally regardless of geography, there's no doubt about it. I think for AXIS, look, it's a heavy short-tail portfolio. It's been a key contributor to our underwriting profits '22 forward. But it's in a position of strong premium adequacy against a landscape that is receding in the order of rate attainment, there's no doubt. In the United States, as you know, we're predominantly a wholesale distributed market. It's a robust marketplace. Submission volume remains very strong. Liability, Pete detailed before, a resurgence of rate in the liability classes. We've been evidencing that. We reported as much in the third quarter. We'll report year-end, but I think that, that momentum is safely stated sustaining itself. In terms of the professional lines, the degree of rate declines in public is much narrower than it has been over many months. But in candor, AXIS not a large public D&O market. It has really diversified its revenue stream purposefully in that connection. Many of our other classes, whether it be our newer businesses that we've added capital to and product, environmental have had a strong year. Our inland team that we brought in is having a strong year. The market dynamics there are strong. Our newly stood up marine team here in North America is off to a very good start. Our Life Sciences business just launched in the third quarter, off to a good start. And so we see a changing landscape admittedly around the degree of rate change that's occurring in the portfolio, in the long-tail classes where we're really persistent around the impact of social inflation, we feel very comfortable on our rate attainment over trend. We're observant to it, and we really run an integrated model there, of course, getting as much insights from our claims and data teams as possible. So favorable market generally, pockets of change by line of business. We've evidenced that to you in primary casualty, public D&O, delegated cyber. We've been opportunistic in the LMM segment, which we talked about a few moments ago. And so we have a diverse product set. We have, in total, a premium adequate portfolio, and we're going to leverage the market as we see those opportunities arise, and we're nimble enough and agile enough to do so.

Got you. And then just adding on to that, Vince, maybe this is Pete also. It sounds like you're saying, listen, we're in a good premium adequate environment. We want to grow right now. It kind of sounds like to me and you tell me, is there more room for margin improvement in the business? Or are we kind of in an environment where it's kind of let's hold margins and grow on attractive margins?

Look, we have attractive loss ratios. Pete and I have said in the past, you should expect us to improve the access of expenses in the component part of the combined ratio. We've been explicit about that. We live in an uncertain world. There's lots of uncertainties in the marketplace, geopolitical, social inflation and many other things. And so I think prudence is our guiding principle. And you've seen over the last 8 quarters, I think, if I recall, Page 11 or 12 in the supplement, you've seen that the gradation of change. It's all in the mid-50s. Pete, you can go on from here.

I would say, Brian, that our focus when we think about margin improvements, let's say, over the next 24 months, really going to come with the G&A ratio and all the work we're doing with how we work. When we think about where our loss picks are now, we're very comfortable with our loss picks. We believe they are prudent and solid but I would not expect to see our loss ratios change. I mean they've been like 52 plus or minus for the last 1.5 years now. And I would expect it to sort of stay in that general range as we're thinking about insurance, by the way, going forward. But overall, we do think that there are growth opportunities for us. We believe the book is premium adequate. We're very excited and actually looking at good pace with the businesses we've invested in this year. We call them green shoots back in May and they're doing well. They need more watering. I'll use an example -- a gardening example for you, but we'll continue to water them, bringing the staff that's needed. We have a really good talent acquisition team. We've been bringing on good teammates and we're very excited as we think about those businesses and what else we can do to continue to grow the business.

Maybe on that, can we talk a little bit about where we are with respect to your expense targets and what still can be done?

Yes. I think there's a couple of things. You saw -- we did some pretty significant actions, I'd say, in a number of our business units over the last 18 months. I mean we've seen some restructuring based upon how we work. So this wasn't just eliminating staff. It was like, what are we doing and how can we do it better. And we've seen changes in our technology stack. We've seen changes in our claims organization. Our operations staff has done some restructuring already. And even in the, I'll call it, the back offices, we've done some restructuring even in the finance team and thought about how can we do things more efficiently and more effective. And that's led to us being able to -- you'll see this year, on a like-for-like basis, our G&A expenses are lower than they were in 2023 and our net earned premium is up, and that's great expense leverage. So I think the combination of those 2, Brian, are what's really going to drive to that 11%. We believe we can continue to grow, and we're going to need to grow and we will grow expenses at much less than the rate of growth of net earned premium. Our target is definitely, I'll call it, G&A is 50% or less of what we're going to grow net earned premium. But we continue to really look at our operations and think through how we can work better and smarter with our markets, and that's allowing us to get better than that 2:1 leverage that we see. As I mentioned, this year the G&A is actually down and then the earned premium is up.

Great. And Vincent, back to you. We're seeing a change in administration in the U.S. as we look into 2025. As you think about the kind of geopolitical landscape and what's going on, does that change your view of maybe where you should be investing business lines that may be more attractive, areas of a little bit more concern as you think about 2025?

We, like you, read what the potential policy changes would be. We're very keen around the impact on many of our lines. I think in a prior discussion, Brian, we talked about just our energy business by way of example. We have a brand-new syndicate out of Lloyd's 2050, dedicated to the renewable space. We think there'll be continued interest in that syndicate. We think that Europe will maintain its standards and its ambition there. And while the United States may have a lessened focused to net zero, we have an onshore energy capability to take advantage, whether it be the fracking segment or other oil and gas production. And so we think there'll be different effects against our portfolio. Net-net, we feel well positioned to deal with the impact of those changes. And we'll see the impact on Tort Reform in the United States that would have a positive bearing certainly on the liability classes. Time will tell whether or not there's any change there. But I think we're not only observant. We've taken actions to make sure the positioning of key lines of business are well in hand to take advantage of any change in policy.

Appreciate it. Great. And then, Pete, there's been some concerns about the DTA and whether things could get reversed. What's AXIS position on that?

We've heard the same, Brian. We've got our ears to the ground hearing what's coming out of the OECD. We'll comply with whatever comes out of the OECD. Right now, I'm hearing everything from -- again, they're looking at Switzerland and Bermuda, both did some form of economic transition adjustment. If it is deemed that the OECD is going to come down with rules that would not permit that, I think our -- I'm going to term it as a worst-case scenario is we put up $163 million of the DTA in the first quarter of this year. I do not think you're going to see Bermuda do any tax legislation between now and the end of the year. So if we get anything from the OECD that puts into question whether that DTA will be allowed, you may see us put up a valuation allowance against that DTA. Again, for us, it's all in the same calendar year. We think about it economically, I just want to remind everybody what the DTA did is reduce the cash taxes being paid to Bermuda as a tax legal entity. So our 15% tax rate in Bermuda is still there. We've been talking about we expect our tax rate next year based upon where we believe we're going to earn income to be about 18% in '25 and '26 going forward. Having said that, the tax rate won't change, but what will happen is that $163 million was going to amortize over 10 years and actually be less than the amount of taxes on a cash basis that we had to give Bermuda. So in a worst-case scenario, if the whole thing gets unwound, which we're hearing now, there's negotiations going on. So that may not be the case. It would really be lost investment income on that, say, $163 million for probably 1/4 of '25 on how it would impact us economically.

Got you. And maybe you can remind us what are some of the other potential offsets to the increased tax rate? I mean we're hearing stuff up about potential for payroll taxes and other things potentially in Bermuda that could be a nice offset on the expense side. And kind of where do we stand on that?

Yes. So there's a tax commission that Bermuda stood up last year in order to help the industry and all the industries in Bermuda deal with what else the entity was going to do with regard to that. That tax commission hasn't come out with any real guidance yet at all. They do have a new tax director that they've hired down in Bermuda to handle all this. He's a gentleman we know we got a lot of respect for. He's an ex-tax director for one of the companies on the island. So we don't have any details, but there was discussion, Brian, that, that's exactly it, that we would see some offsets for payroll taxes and other taxes that as a corporation, we're paying to Bermuda that could offset some of the 15%. From what we understand, that type of offset would not get into the ire of the OECD. It's like a standard operating procedure of, yes, you're still paying tax and you're paying at least 15%. It's just sort of saying, okay, in totality, let's look at the tax you're paying. We don't have any details on that yet. I know the industry is pushing Bermuda to work towards that faster. And our expectations are we'll see something come out in '25 that we can then react to more specifically to you.

That's great. Another topic that's been a hot topic for, let's call it, at least last year, 1.5 years is generative AI. And what is happening with AI and generative AI in the insurance industry. Vince, Pete, maybe you can talk a little bit about how AXIS is using it, adopting it? Where can see benefits here going forward?

As part of how we work, Brian, we have undertaken any number of use case examinations of how to utilize AI. We've actually affected a number of AI tools in our operating platform, whether they be assisting us in the provision of managing our T&E expenses, whether it be assisting us in bill reviews with our law firms and other -- or vendors, excuse me, whether it be in our front end of our business. As you may be aware, in the third quarter, we announced 2 different tools, 2 different AI tools effectively assisting us with how we accept submissions from the open market, how we bring them through a set of analytics that create prioritization of that submission for our underwriters with a variety of other diagnostics in appetite, premium adequacy, things of that sort and kind. And so it's a vibrant part of our how we work technology strategy that influences our operating model. And I think Pete would certainly remind all of us on the AXIS side that it ought to help us in our G&A aspiration as well, and we have a pretty strong set of cost-benefit analyses that support these investments. And so that's how we're thinking about it. We think that it's important. And while we don't necessarily agree with some of our competitive landscape on the degree of pattern recognitions that have shown themselves in risk selection in some of our specialty classes, we do see it's use as being vital in our operating platform and no doubt will take a larger place next year and beyond.

Makes sense. Maybe another one here. Ceded reinsurance strategy. Anything that we should think about here going forward potentially in the next year and kind of thoughts on maybe changes in the way you're looking at things, retaining more risk? How should we think about it?

Well, you said it before. You said, look, there's been a lot that's gone on in the pace of repositioning at the firm, and one of them involves our outbound reinsurance. You've seen our relationship of gross to net change. We've retained more in certain of our big and substantial purchases that doesn't happen by coincidence. It happens by taking a long-term view of the role and purpose of our reinsurance, number one, the positioning, the continued limit deployment of our company, the different customer segments that we're pursuing. All of that goes into the recipe of where we think we need to have additional support in our company around reinsurance purchase. I don't expect that to reasonably change materially in '25. We've done a lot of changes already to align with our ongoing intermediate underwriting strategy. And as you know, Brian, we've joked in the past we're specialists. And so by the very definition, we handled the dislocations of the primary markets. And so will we change? Potentially, of course, we'll respond to those market opportunities that are dislocated. You think about our marine war capabilities out of London. We've served a vital purpose there. It's a 7-day policies with some premium that is being placed at risk but with some opportunism on the pricing side. We also are in the transactional liability space. We don't dictate when M&A is going to be vibrant, but we're market participants. So those are a couple of examples of dealing with the markets.

Got you. I know we talked about a little bit upfront. But maybe just kind of your outlook and I guess this kind of goes into geopolitical or whatever, your outlook kind of for M&A here going forward, what's the market look like? Do you kind of expect to increase activity?

I think for AXIS, we've talked a lot about what our priorities for capital are, right? So our priority is to organically grow, invest in the business. That's our -- that's the top of the list. After that, there's a lot of attractive uses of capital for us. We could repay debt. We could have dividends. We could have a buyback. We could retain more of the business we write. So there's a lot of attractive uses of capital, which means that the bar for an acquisition for us would have to be very high. But we do look at things, and that's part of what I do here. And -- but Vince has laid out a very clear strategy of what we like, what we're trying to become. So anything we looked at would have to be to augment that strategy, something specialty-oriented, probably something of a scale that would be appropriate for us and to augment us on the journey that we're on. So I think we're pretty clear about where that is in the priority list and what would be attractive to us.

Got you. And we got a couple of minutes left to the top of the hour. Vince, I'm put in the spot here a little bit. I'm an investor sitting here listening to this conversation. Give me your kind of 2- to 3-minute elevator pitch as to why I should buy AXIS' stock here?

Okay. I'll say the following to you, Brian. It's a great question, one that was asked by an investor of ours in Canada. First of all, we're an organization that says what it means and does what it says. And what we've said we aspire to be the top specialty underwriter. We have a set of financials over the last couple of years that are convincingly clear around that ambition. We've moved from producing results that were low to bottom quartile to increasingly top quartile in a number of dimensions. We have continuous universe potential disease. We have moats and the product capabilities of our team across many different products and forms of distribution. Our team -- ability to attract team to support our growth and profitable growth ambition remains strong. And finally, we have a balance sheet, a capital structure and a reserve position that augurs confidence to our shareholders, and we look forward to proving it over the many quarters in front of us.

Terrific. That was really, really helpful. And just you know, the reinsurance transaction has been viewed favorably so far. Your stock is up in a down market. So congrats on that one. That's terrific. Well, I want to thank you all for participating Vince, Pete, Cliff. Thank you very much for doing this fireside chat. It was terrific. I really appreciate it. And if anybody on the line has got any follow-up questions, you can shoot to me, I'll shoot them to Cliff. We'll get them all answered for you.

Thank you so much, Brian. Happy holidays.

Happy holidays. Take care.

Bye.