Axis Capital Holdings Limited · NYSE:AXS
Axis Capital — Investor Day (June 2013)
119 slides from Axis Capital's investor day presentation, Jun 12, 2013
Slide 1: AXIS Capital Investor Day 2013
AXIS Capital Investor Day 2013 Strong Fundamentals. Continued Success. June 12, 2013
Slide 2: Safe Harbor Statement
Safe Harbor Statement 2 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
Slide 3: AXIS Capital Investor Day 2013
AXIS Capital Investor Day 2013 Strong Fundamentals. Continued Success. June 12, 2013
Slide 4: What to Listen For
What to Listen For 4 Underwriting Excellence Underpins Sustainable Differentiation Strength, Depth and Focus of Global Specialist Franchises Diversifying Growth and Enhanced Portfolio Construction Proven AXIS Approach to Strategic Initiatives Strong Balance Sheet and Prudent Steward of Capital
Slide 5: Today's Agenda
1:00pm Overview of Strategy and Team Strong Fundamentals. Continued Success. Albert Benchimol President & CEO AXIS Re Well-Positioned for the Changing Environment Jay Nichols CEO, AXIS Re AXIS Insurance Sustainable, Growing and Profitable Specialty Insurer Jack Gressier CEO, AXIS Insurance AXIS Acci
Slide 6: AXIS Team Members Presenting Today
AXIS Team Members Presenting Today 6 Jay Nichols CEO, AXIS Re Albert Benchimol President & CEO Bill Fischer CUO, AXIS Re Jack Gressier CEO, AXIS Insurance Joe Henry CFO Tim Covello EVP, AXIS Insurance Chris DiSipio CEO, AXIS Accident & Health Joe England EVP, AXIS Insurance Stephan Knipper President
Slide 7: Overview of Strategy and Team
Overview of Strategy and Team Strong Fundamentals. Continued Success. Albert Benchimol, President & CEO
Slide 8: Agenda
Agenda •Who We Are •Review of Performance • Strategic and Financial Goals 8
Slide 9: Our Mission
Value Proposition AXIS is a global insurer and reinsurer, providing our clients and distribution partners a broad range of risk transfer products and services, meaningful capacity and unquestioned financial strength. Culture We nurture an ethical, entrepreneurial and disciplined culture that promote
Slide 10: Strategic Goal
Strategic Goal Volatility by Quintile R e turn s b y Quin til e 5 th 4 th 3 rd 2 n d 1 s t Lo w e s t Highe s t 5th 4th 3rd 2nd 1st Lowest Highest Goal is to consistently deliver top-quintile ROACE and growth in diluted book value per share with industry average volatility 10
Slide 11: Hybrid (Re)insurer with Strategic Flexibility
44% 56% Hybrid (Re)insurer with Strategic Flexibility 11 • 710 Employees • GPW CAGR 2002 – 2012 = 11% • Underwriting Profit every year • 193 Employees • GPW CAGR 2002 – 2012 = 19% • Underwriting Profit 9 of 11 years (1) Includes corporate expenses. AXIS Insurance AXIS Re ‘02-’12 GPW $20.3 ‘02-’12 Un
Slide 12: Strategic Global Presence
• 29 offices on 5 continents • Risk-bearing platforms in the U.S., Bermuda and Europe, with international branches • 1,160 employees world-wide Strategic Global Presence 12
Slide 13: Financial Strength and Flexibility
Financial Strength and Flexibility 13 Note: Financial data as of 3/31/2013. (1) Pro forma for May 2013 issuance of $225M Series D Preferred and redemption of $100M Series A Preferred. Competitive Capital Base • Total capital of $7.0 Bn(1) Competitive Financial Strength Ratings • Standard & Poor’s “A
Slide 14: Delivered Excellent Shareholder Value Creation
$13.90 $16.74 $19.29 $18.34 $23.45 $28.79 $25.79 $33.65 $39.37 $38.08 $42.97 $44.67 $0.14 $0.64 $1.24 $1.855 $2.535 $3.29 $4.10 $4.96 $5.89 $6.86 $7.11 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013Diluted BVPS¹ Accumulated Dividends De
Slide 15: Delivered Top-Quintile Average ROACE
Delivered Top-Quintile Average ROACE 15 Sources: Company documents. Note: US Specialty group includes American Financial, HCC, Markel, RLI, W.R. Berkley, and Alleghany. US Scale group includes Chubb, CNA, Hartford, and Travelers. Bermuda Hybrid group includes ACE, Arch, Argo, Aspen, Allied World, AX
Slide 16: Delivered Top-Quintile Underwriting Profitability
16 Sources: Company documents. Note: US Specialty group includes American Financial, HCC, Markel, RLI, W.R. Berkley, and Alleghany. US Scale group includes Chubb, CNA, Hartford, and Travelers. Bermuda Hybrid group includes ACE, Arch, Argo, Aspen, Allied World, AXIS, Endurance, and XL. Reinsurance Pr
Slide 17: Leveraging Core Underwriting Skills: Consistent, Superior Results
Leveraging Core Underwriting Skills 17 Consistent, Superior Results
Slide 18: Highly Experienced Leadership Team
Joseph Henry CFO Years in Industry: 39 Years at AXIS: 1 Highly Experienced Leadership Team 18 Average Years of Industry Experience : 27 Albert Benchimol President & CEO Years in Industry: 24 Years at AXIS: 2 Jay Nichols CEO, AXIS Re Years in Industry: 31 Years at AXIS: 1 Dennis Reding Chief Operatin
Slide 19: Adding Talent to Deliver on Strategic Initiatives
• Added key management talent • Attracted seasoned underwriting teams • Attracted 85 employees to our Accident & Health initiative oIncluding Senior A&H management with an average 27 years of industry experience Adding Talent to Deliver on Strategic Initiatives 19 Name Title Years of Industry Experi
Slide 20: Strategic Initiatives to Achieve Goals
Invest in our people and culture • Underwriting talent which delivered top-tier underwriting results since inception doing the same • Successfully attracting and adding new top-tier underwriting talent Deliver diversified growth • Bring specialist underwriting to new target markets • Develop new spe
Slide 21: Strong Fundamentals. Continued Success.
Quality, sustainability and profitability Excellent underwriting and value creation track record Highly experienced leadership team Strategic initiatives focused on consistently delivering top-quintile risk-adjusted returns Strong Fundamentals. Continued Success. 21
Slide 22: AXIS Re Well-Positioned for the Changing Environment
AXIS Re Well-Positioned for the Changing Environment Jay Nichols, CEO, AXIS Re
Slide 23: Agenda
Agenda •Overview of AXIS Re •Underwriting excellence • Strategic approach to reinsurance •Overview of centers of excellence •New initiatives 23
Slide 24: Diversified Global Reinsurer
17% 21% 4% 13% 14% 16% 13% 2% Property Catastrophe Engineering Motor Credit and Surety Professional Lines Liability Other Diversified Global Reinsurer 24 $0 $500 $1,000 $1,500 $2,000 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2012 Gross Premiums Written b
Slide 25: Underwriting Outperformed Diversified Peers
34.0% 27.4% 15.5% 10.5% 8.3% 7.4% 7.3% 7.3% 6.8% 6.3% 5.6% 4.4% 3.9% 3.7% 1.0% 0.6% 0.4% (0.9%) 24.4% 10.5% 8.7% 4.2% 3.4% 1.4% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Underwriting Outperformed Diversified Peers 2003 – 2012 Aggregate Underwriting Profitability(1) Source: Company documents. Note: “Top
Slide 26: Solid Risk-Adjusted Underwriting Returns
Volatility (Standard Deviation) A v era g e A n n u a l U n d er w ri ti n g P ro fi ta b il it y (1 ) Solid Risk-Adjusted Underwriting Returns 2003-2012 Average Annual Underwriting Profitability(1) vs. Volatility 26 European Reinsurers in Top 10 Top 10 Reinsurers > $1.5 Bn NPW (ex. European) Reinsu
Slide 27: Strategic Approach Executed in Multiple Dimensions
Strategic Approach Executed in Multiple Dimensions 27 Approach to risk-taking in multiple dimensions recognizes evolution of the (re)insurance landscape • (Re)insurance landscape changing • Opportunities to enhance and expand returns in all lines and geographies • Executing on all dimensions deliver
Slide 28: Highly Experienced Leadership Team
Highly Experienced Leadership Team 28 (1) Excludes new agriculture reinsurance underwriters. Jay Nichols CEO, AXIS Re Years in Industry: 31 Years at AXIS: 1 Stefan Habereder Chief Risk Officer Years in Industry: 18 Years at AXIS: 9 William Fischer Chief Underwriting Officer Head of Property Years in
Slide 29: Organized to Better Serve the Client
Organized to Better Serve the Client 29 New York Toronto Zurich Madrid Paris Singapore Sao Paulo Bermuda (1) Includes employees in Zurich, Madrid, Sao Paulo, and Paris. Hub 2012 GPW ($ in Millions) % of 2012 GPW Employees North America $544 30% 78 Europe(1) 810 44 89 Bermuda 441 24 19 Far East 35 2
Slide 30: Overview of Global Centers of Excellence
18% 18% 3% 1% 14% 14% 12% 13% 7% 41% 14% 39% 7% 30 Catastrophe Property Professional Lines Credit and Surety Engineering Liability Motor Other Agriculture Casualty Property & Other Credit & Surety Overview of Global Centers of Excellence Premiums In-Force by Line of Business - $2,012 million (as of
Slide 31: Attributes of Centers of Excellence
Attributes of Centers of Excellence 31 How We Deliver Franchise Value Best Underwriters Offering the Best Products Executing with a Regional Presence With the Best Decision Support Systems (DSS) Understand markets and customers Portfolio and stand-alone deal-focus – evaluating margin, volatility and
Slide 32: Centers of Excellence Encompass Franchises
Centers of Excellence Encompass 15 Franchises 32 Property & Other In-force Premium: $820 million 46% 15% 30% 9% Property Catastrophe Property Per Risk Property Pro-rata Engineering 37% 25% 33% 5% Professional Lines Liability Motor Workers' Compensation Casualty In-force Premium: $778 million 12% 80%
Slide 33: Agriculture: Our Newest Center of Excellence
Agriculture: Our Newest Center of Excellence 33 Underwriters • Led by Peter Griffin (Bermuda) and Joseph Cole (Chicago) • 25 years of average industry experience Customers • Strong and long-term customer relationships Products • Product design and consultative role with respect to risk selection Reg
Slide 34: Agriculture Insurance Market is Global and Growing
Agriculture Insurance Market is Global and Growing 34 Agriculture is a diversifying source of growth and requires technical, specialist expertise US $12.6 Bn • Mostly MPCI through crop writers in the Federal Crop Insurance Program • Federal government: premium subsidy to farmers and SRA coverage for
Slide 35: New Opportunity: Weather & Commodity Markets
New Opportunity: Weather & Commodity Markets 35 • Strong and familiar team (17 years of average industry experience and start-up experience) • Specialty, non-commoditized market • Capacity dislocation • Growth opportunity ($11 Bn+ global market and growing) • Execution capabilities in (re)insurance
Slide 36: Overview of Weather & Commodity Markets
(Re)insurance & Capital Markets Hybrid Overview of Weather & Commodity Markets 36 Electricity Outage Products Liquid it y Severity of Payout Insurance Like Capital Markets Like Fre q u e n c y of P a y men t S tand a rd iz e d C us to m iz e d ILW Products Exchange Trade Cat Derivatives Weather-Cont
Slide 37: Third Party Capital Strategy
Third Party Capital Strategy Recently launched initiative leveraging proven track record of underwriting excellence achieves a number of key goals 37 Provides multiple products to address changing market conditions Deliver value to both cedant and investor clients by leveraging market leading underw
Slide 38: Enhancing Portfolio Construction
Enhancing Portfolio Construction 38 • Start up and maturing phases • Staff primarily highly experienced underwriters supported by analytical professionals • Excellent transactional underwriting • Built customer loyalty • Defined AXIS as a “go to” market • Leverage excellent transactional underwritin
Slide 39: Enhancing Portfolio Construction
Enhancing Portfolio Construction 39 CASE STUDY 1 Deterministic • Historical • Hypothetical • By region/peril • Custom events Volatility • Market share analysis • Line size management • Customer concentration • Coverage • PML impact analysis • Aggregation and concentration analysis • Return per unit
Slide 40: Enhancing Portfolio Construction: Market Share Analysis
Enhancing Portfolio Construction 40 Example: Market share analysis introduced as critical component of portfolio construction CASE STUDY 1 A X IS R e % S h a re o f In d u str y L o s s Industry Loss
Slide 41: Leadership in Credit & Surety Reinsurance
$0 $5 $10 $15 $20 41 (1) AXIS estimates. Credit & Surety Market Overview by Estimated Premium(1) ($ in Billions) $0 $5 $10 $15 $20 ~$19 billion $0 $5 $10 $15 $20 Credit & Surety Primary Market Retained Business Reinsurance Market ~$13 billion ~$6 billion • Leader: one of top six reinsurers • Average
Slide 42: Trade Credit Industry: Understanding the Cycle
42 (1) Source: Euler Hermes Economic Research Department publication. (2) Source: International Credit Insurance and Surety Association. Trade Credit Industry: Understanding the Cycle Leadership in Credit & Surety Reinsurance CASE STUDY 2 113 124 106 96 100 94 86 111 141 134 129 134 69% 53% 42% 42%
Slide 43: Leadership in Credit & Surety Reinsurance
43 Leadership in Credit & Surety Reinsurance CASE STUDY 2 $73 $103 $98 $125 $154 $224 $254 $300 $265 39.0% 39.1% 43.6% 49.5% 94.4% 66.8% 50.7% 46.8% 61.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $0 $50 $100 $150 $200 $250 $300 $350 2004 2005 2006 2007 2008 2009 2010 2011 2012 AXIS Re Credit & Su
Slide 44: Well-Positioned to Access Growing Global Business
44 (1) Data from PricewaterhouseCoopers January 2013 report World in 2050: The BRICs and beyond: prospects, challenges and opportunities. GDP is for Top 20 economies. PPP represents purchasing power parity in 2011 terms. Well-Positioned to Access Growing and Attractive Global Business Evolving GDP G
Slide 45: Surety Latin America Industry Results
45 Surety growth driven by infrastructure needs in developing countries (i.e. Latin America) 25% 26% 23% 25% 22% 22% 21% 22% 34% 32% 34% 29% 30% 30% 33% 34% 0% 5% 10% 15% 20% 25% 30% 35% 40% 2005 2006 2007 2008 2009 2010 2011 2012* Technical Result / Written Premiums (1) Source: Latino Insurance. Pe
Slide 46: Well-Positioned for the Changing Environment
Well-Positioned for the Changing Environment 46 Building on a solid platform of underwriting excellence Focused specialty product approach and global reach sustain influence Increased emphasis on portfolio construction Dynamically managing risk to enhance return New initiatives provide diversifying
Slide 47: AXIS Insurance: Sustainable, Growing and Profitable Specialty Insurer
AXIS Insurance Sustainable, Growing and Profitable Specialty Insurer Jack Gressier, CEO, AXIS Insurance
Slide 48: Agenda
Agenda •Overview of AXIS Insurance •Underwriting excellence • Strategic initiatives • Breadth of AXIS Insurance franchise • Ability to execute •Overview of AXIS Accident & Health 48
Slide 49: Diversified Global Specialist Insurer
Diversified Global Specialist Insurer 49 27% 11% 2% 3% 2% 36% 12% 7% Property Marine Terrorism Aviation Credit and Political Risk Professional Lines Liability Accident & Health $0 $500 $1,000 $1,500 $2,000 $2,500 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2
Slide 50: Strategic Global Presence
Strategic Global Presence 50 Accessing risk in the right place at the right time North America ‘12 GPW = 58% of Insurance • 508 employees • 12 U.S. offices • Toronto branch office • Licensed in 50 states, District of Columbia, & Puerto Rico • Surplus lines eligible in 50 states, District of Columbia
Slide 51: Underwriting Has Outperformed Specialty Peers
Underwriting Has Outperformed Specialty Peers 51 2003 – 2012 Aggregate Underwriting Profitability(1) Source: Company documents. Note: US Specialty includes Alleghany, American Financial, Houston Casualty, Markel, RLI, and W.R. Berkley. Bermuda “Scale” Specialty includes ACE and XL. Bermuda Specialty
Slide 52: Excellent Risk-Adjusted Underwriting Profitability
Excellent Risk-Adjusted Underwriting Profitability 2003-2012 Average Annual Underwriting Profitability(1) vs. Volatility Source: Company documents. Note: US Specialty includes Alleghany, American Financial, Houston Casualty, Markel, RLI, and W.R. Berkley. Bermuda “Scale” Specialty includes ACE and X
Slide 53: Profitable Insurance Platform
Profitable Insurance Platform 53 Source: Dowling & Partners Research. Reserve Development Above Avg Releases Avg Releases Adverse Almost None ACE XL AWH ACGL AXS AHL ENH VR RE ACE (Ex Crop) ENH (Ex Crop) RE (Ex Crop) 0% 20% 40% 60% 80% 100% 88% 92% 96% 100% 104% 108% 112% 2 0 1 2 E s ti m ated C as
Slide 54: Sustainable, Differentiated Insurance Franchise
Sustainable, Differentiated Insurance Franchise 54 Attributes • Leadership o Clients and distribution partners seek our underwriting and claims expertise o Transparent approach with clients and distribution partners • Talent • Scale and Diversity Sustainability • Ability to digest volatility • Abili
Slide 55: Organized to Respond to Customer Needs
Organized to Respond to Customer Needs 55 Three major P&C operations complemented by growing A&H franchise and specialist Capital Risk Solutions unit AXIS Insurance 2012 Gross Premiums Written $2.3 Bn Capital Risk Solutions • Political risk • Credit insurance • Coverages primarily for banks around t
Slide 56: Highly Experienced Leadership Team
Highly Experienced Leadership Team 56 Jack Gressier CEO, AXIS Insurance Years in Industry: 27 Years at AXIS: 11 Michael Rutherford President, Capital Risk Solutions Years in Industry: 33 Years at AXIS: 8 Mark Gregory CEO, Specialty Lines Years in Industry: 33 Years at AXIS: 3 Carlton Maner Divisiona
Slide 57: Strategic Initiatives Delivering Diversified Growth
• Australia Marine • Asia Onshore / Renewable Energy • Asia Professional Lines • Asia Marine • Asia / UK Construction & Professional Indemnity New Geography • International MGA Expansion • Excess Casualty (Retail) • Selected for highly specialized broker panels • Primary Casualty (Retail Focus) • Su
Slide 58: Where AXIS Insurance is Going
Where AXIS Insurance is Going 2003-2012 Average Annual Underwriting Profitability(1) vs. Volatility 58 Volatility (Standard Deviation) US Specialty Bermuda “Scale” Specialty Bermuda Specialty ex. “Scale” Source: Company documents. Note: US Specialty includes Alleghany, American Financial, Houston Ca
Slide 59: Well-Positioned in the International Market
Well-Positioned in the International Market 59 Origins in London-market specialty lines at AXIS inception • Addresses specialty global market distributed among European/London and U.S./Bermuda-based carriers • Average years of industry experience for specialty lines underwriting management (11 emplo
Slide 60: North America Remains a Key Growth Area
60 North America remains a key growth area for AXIS Products Retail Property Wholesale Property Commercial D&O Financial Institutions D&O Errors and Omissions Liability Environmental Liability Fidelity and Surety Primary Casualty Excess Casualty US MGA AXIS Insurance Presence in North America
Slide 61: Expanding & Diversifying North American Distribution
42.0% 51.1% 52.2% 37.1% 5.8% 11.8% 2004 2012 Retail commercial P&C brokers Wholesale commercial P&C brokers MGA Expanding & Diversifying North American Distribution 61 North America Platforms Distribution Profile 182 886 Number of Distribution Relationships
Slide 62: Methodically Built Global Professional Lines Franchise
Methodically Built Global Professional Lines Franchise 62 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 • Acquired renewal rights to Kemper’s D&O Business • New Financial Lines Insurance capability in Bermuda • New Pro Lines Unit formed in U.S. • Expanded U.S. Professional Lines capabilities - D
Slide 63: Coordinated Global Portfolio with Local Approach
Coordinated Global Portfolio with Local Approach 63 U.S. AXIS ‘12 GPW = 67% of PL • Centralized Underwriting Control • Regional Approach • Primarily Excess Public D&O • Specialty Products for E&O / PI lines • Specialty Products on Primary Basis • 54% Excess / 46% Primary Bermuda AXIS ‘12 GPW = 4% of
Slide 64: Diversified and Measured Growth in Professional Lines
Diversified and Measured Growth in Professional Lines 64 Global Professional Liability (E&O) ‘06-’12 CAGR 14.6% Global Financial Institutions ‘06-’12 CAGR 10.0% Global Commercial ‘06-’12 CAGR 3.8% $181 $196 $201 $213 $201 $213 $239 $238 $240 $266 $62 $97 $127 $130 $131 $174 $227 $243 $225 $230 $0 $2
Slide 65: Highly Experienced Professional Lines Management
Highly Experienced Professional Lines Management 65 • Average years of management industry experience is 19 years (6 years at AXIS) • 205 total employees globally Peter Wilson President, US Insurance Years in industry: 30 John Van Decker Years in industry: 29 Hillary Williams Years in industry: 24 E
Slide 66: Capital Risk Solutions Overview
Capital Risk Solutions (“CRS”) Overview 66 Capital Risk Solutions 2002-2012 ($ in Millions) AXIS Insurance 2012 GPW Credit and Political Risk 1.7% Credit Crisis Political Risk Insurance 5% of 2012 CRS GPW • Coverage for multi-national corporations against hostile sovereign actions which deprive clie
Slide 67: Current Portfolio Incorporates Lessons Learned
Current Portfolio Incorporates Lessons Learned 67 • Alignment of interests • Robust limit management • More balanced portfolio construction • Standard AXIS contract wording enforced • More independent risk analysis • Enhanced monitoring
Slide 68: Exposure Rebalanced
Exposure Rebalanced 68 Since the credit crisis, we have reduced overall exposure and average limits 0.0 0.2 0.4 0.6 0.8 1.0 1.2 2008 2009 2010 2011 2012 E x p o s u re I n d e x e d t o 1 Amortized Limits Average Limits
Slide 69: Portfolio Diversified
Portfolio Diversified 69 A- and above, 16% BBB, 39% BB, 32% B, 12% CCC+ and below, >1% Exposure by Rating(1) Note: Ratings are current AXIS internal ratings. (1) Based on amortized notional credit exposure outstanding as of May 31, 2013. (2) Exposure added since 2009. Project Finance, 14% Pre-export
Slide 70: Attractive and Diversifying Macroeconomic Risk
Attractive and Diversifying Macroeconomic Risk 70 Current Exposure - Obligor Profile Europe, 26% Asia Pacific, 24% Africa and Middle East, 17% Latin America, 16% CIS, 13% North America, 4% Current Exposure - Regional Profile Sovereign Default, 31% Telecoms, 19% Banking, 11% Energy O&G, 7% Utilities,
Slide 71: Expanding Specialist Franchise
71 Expanding Specialist Franchise CASE STUDY 1 Opportunity • Acquisition of Media/Pro oMGU focused on Media, Miscellaneous PL (MPL) and Tech/Cyber oOffices in Kansas City, Toronto and London o 28 year history of quality underwriting • Market-leading source of Media underwriting and claims experience
Slide 72: Integrated Solutions Addressing Complex Needs
Multiple Product Lines Multiple Geographies ABC Manufacturing AXIS 2002 – Today GPW = $137 million ONE Aviation Property & CAT D&O Liability Marine Bermuda New York London Chicago Dublin 72 Integrated Solutions Addressing Complex Needs CASE STUDY 2
Slide 73: Expanding our Specialty Energy Franchise to Renewable Energy
73 Exploration Production Processing Transportation Marketing Production Transportation Refining Marketing Crude Oil Upstream E&P Midstream Downstream R&M Integrated product offering across energy supply chain CASE STUDY 3 Leveraging Our Strengths for Profitable Growth Expanding our Specialty Energy
Slide 74: Leveraging Our Strengths for Profitable Growth
74 Opportunity • World seeking out alternative sources of energy • Reliable and comprehensive renewable energy sector coverage needed • Limited number of insurers in space • Critical mass, proven technology and acknowledged experts • Potential for additional market premium > $1.5 Bn over the next fi
Slide 75: Positioned to Address Energy Opportunities
75 Power Sector Offshore Renewables Onshore Renewables Offshore Construction Onshore Drilling Offshore production, development Midstream Refining and Petrochemicals L O W HIGH HIG H GR O W T H AXIS MARKET SHARE LOW We have positioned ourselves to address opportunities that meet our requirements 48%
Slide 76: Sustainable, Global and Profitable Specialty Insurer
Sustainable, Global and Profitable Specialty Insurer 76 Underwriting excellence Focus on risk-adjusted returns Proven ability to deliver complementary, diversifying growth Proven AXIS approach to strategic initiatives
Slide 77: AXIS Accident & Health: The Right Strategy in a Growing Market
AXIS Accident & Health The Right Strategy in a Growing and Profitable Market Chris DiSipio, CEO, AXIS Accident & Health
Slide 78: Agenda
Agenda • What we’ve been up to since 2009 •What we deliver •Where we are going 78
Slide 79: Establishing the Global Footprint
Establishing the Global Footprint 79 With an established global footprint, AXIS entered the global A&H market when it was ripe for a new entrant 2001-2008 2009 2010 2011 2012 Leveraged established AXIS infrastructure and intellectual capital to launch platform Q1 AXIS strategic move into Accident &
Slide 80: Highly Experienced Management Team
Highly Experienced Management Team 80 Team with vast international industry experience as well as significant experience with start-up operations Chris DiSipio CEO Accident & Health 29 years experience Patrick Collins Chief Actuary 23 yrs experience Joe Freedman Chief Risk Officer 29 yrs experience
Slide 81: AXIS Accident & Health Value Proposition
AXIS Accident & Health Value Proposition 81 Our business model delivers very focused solutions to targeted customer segments Characteristics Benefits to Market Insurance and Reinsurance Hybrid • Global market access • Regulatory flexibility • Broader customer appeal New Entrant, No Legacy • Recogniz
Slide 82: Accessing Growing Global Demand
Accessing Growing Global Demand 82 Insurance solutions for target groups or reinsurance covers for carriers addressing targeted exposures Employers and their Employees Groups including: • Students • Travelers • Expatriates • Associations AXIS A&H Insurance Other Carriers Fronting Company Captive Bro
Slide 83: Specialty Accident & Health Product Portfolio
Specialty Accident & Health Product Portfolio 83 We differentiate ourselves through product innovation and customization for targeted customer segments Insurance Personal Accident Death and disability due to an accident Business Travel Death, emergency medical expenses while traveling on business Sp
Slide 84: AXIS Accident & Health Risk Return Profile
AXIS Accident & Health Risk Return Profile 84 Managing a diverse portfolio of insurance and reinsurance products reduces volatility and enhances risk-adjusted returns R et u rn Limited Medical Expatriate Health Travel Accident Excess of Loss Catastrophe Medical Excess of Loss Per Person Participant
Slide 85: An Underwriting-driven Business
An Underwriting-driven Business at AXIS 85 A&H is built on the same foundational principles as AXIS P&C operations Risk Management • Accumulation Management • Catastrophe Modeling Underwriting Focused • Risk taker, not marketer • Peer review Profit Driven • Risk-adjusted returns Portfolio Management
Slide 86: Balanced by Geography and Product
64% 24% 6% 6% Health Accident Specialty Programs Travel 50% 19% 18% 13% US and Canada UK/Continental Europe Africa/Middle East Asia Balanced by Geography and Product 86 Product balance and geography are closely related 2013 Expected 40% 40% 10% 10% Long Term Target 34% 26% 20% 20% 2013 Expected Long
Slide 87: Positive Earnings Contribution Expected in 2014
87 $6 $111 $113 $115 $3 $58 $112 $37 $0 $50 $100 $150 2010 2011 2012 1Q 2013 GPW NPE $0 $17 $48 $11 $0 $5 $30 $12 $0 $15 $30 $45 $60 2010 2011 2012 1Q 2013 GPW NPE Positive Earnings Contribution Expected in 2014 Runway for insurance operations is naturally longer than reinsurance ($ in Millions) Ins
Slide 88: The Right Strategy in a Growing and Profitable Market
Experienced, well-known team Fully compliant products built for today’s market Flexible, hybrid (re)insurance model preferred to access targeted portfolios Focused on underwriting and risk management The Right Strategy in a Growing and Profitable Market 88
Slide 89: Break
Break
Slide 90: Risk: The Right Balance for AXIS
Risk The Right Balance for AXIS Michael Steel, Chief Risk Officer
Slide 91: Agenda
Agenda •Overview of ERM Framework • Strategy and Risk 91
Slide 92: Enterprise Risk Management Framework: Key Components
Enterprise Risk Management Framework: Key Components • Risk-aware culture • Governance structure that places significant importance on risk management • Independent group risk function • Risk standards spanning material risks to the business • Timely risk reporting • Well-advanced internal capital m
Slide 93: Balanced Composition of Capital at Risk
Prospective Underwriting Risk Capital Drivers(1) Property Catastrophe Property Other Casualty Professional Lines Terrorism Credit Specialty Motor A&H Balanced Composition of Capital at Risk 93 Overall Drivers of Risk Capital (1) 100 - 5,000-year TVAR result. Prospective Underwriting Risk Reserving R
Slide 94: Group Catastrophe Exposure Reduced
Group Catastrophe Exposure Reduced 94 AXIS Property Catastrophe Portfolio: Modeled 1-in-250 Annual Result (Net of Premium) 70.0% 80.0% 90.0% 100.0% 110.0% 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1
Slide 95: Risk Reward Profile Analyzed in Planning
Risk Reward Profile Analyzed in Planning 95 • Capital model used to determine by line ROEs as well as overall ROE • Risk Management reviews all plan assumptions underlying new strategies • Actuarial provides a validation of planned loss ratios • Plan is tested against Risk Management framework • Ris
Slide 96: Analyzing the Risk Return Profile
P ro b ab ili ty Analyzing the Risk Return Profile 96 Median RoE Return on Equity Low High 1 in 10 Yr Return 1 in 10 Yr Loss 1 in 100 Yr Loss 1 in 100 Yr Return
Slide 97: AXIS Diversification in Action
AXIS Diversification in Action 97 Diversification provides more desirable risk / return profile P&C generates less risk and return than Property Catastrophe alone Adding diversifying credit lines lowers risk while increasing return E xpe c ted U nder w ri ting R e s ul ts Volatility in Underwriting
Slide 98: Optimizing Our Reinsurance Purchasing
Re tu rn ( M e d ia n Un d e rw ri ti n g Res u lt ) Earnings Volatility Optimizing Our Reinsurance Purchasing 98 Reinsurance Impact Analysis (Non-Catastrophe Placements) Increasing Retentions within AXIS Insurance
Slide 99: Diversification with Low-Correlated Asset Classes
-26% -23% -21% -18% -15% -12% -10% -7% -4% -2% 1% 4% 7% 9% 12% 15% 17% 20% 23% 26% 28% Fair Value at Risk as % of Book Value Diversification with Low-Correlated Asset Classes 99 Asset class diversification has improved returns and tail-risk exposure in our investment portfolio Distribution of portfo
Slide 100: The Right Balance
The Right Balance 100 Diversification is a critical feature Catastrophe exposure re-balanced Strategic initiatives will deliver enhanced risk/return profile
Slide 101: Finance and Capital Management
Finance and Capital Management Balancing the Interests of All Stakeholders Joe Henry, Chief Financial Officer
Slide 102: Agenda
Agenda • Investment portfolio positioning •Conservative reserving •Capital management 102
Slide 103: Investment Portfolio Goals and Objectives
Investment Portfolio Goals and Objectives 103 AXIS Investments maintains a prudent strategy balancing the requirements of our various external stakeholders • Protect the Balance Sheet oMitigate negative impact of interest rate increases and/or spread widening • Provide consistent annual income • Con
Slide 104: Significant Contribution to Book Value Accretion
Significant Contribution to Book Value Accretion 104 AXIS Investments has successfully managed shocks and prudently delivered book value growth Pre-Tax Cumulative Contribution to Book Value from Investments ($ in Millions) $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 2001 2002 2003 2004
Slide 105: Total Returns Have Improved
Total Returns Have Improved 105 2.2% 2.4% 2.5% 2.6% 2.9% 3.5% 3.7% 0% 1% 2% 3% 4% Peer 6 Peer 5 Peer 4 Peer 3 Peer 2 Peer 1 2003 – 2008 Annualized 2009 – 2012 Annualized Total Annualized Return on Overall Investment Portfolio Source: Blackrock. Note: Peer Universe includes Class of 2001 Bermuda comp
Slide 106: Integrated Investment Process With Strong Oversight
106 Insource Outsource AXIS Investments in-sources asset class allocation and external manager selection and outsources security selection Integrated Investment Process With Strong Oversight Custom Benchmark Construction Compliance Monitoring Performance Monitoring Security Selection Trade Execution
Slide 107: Considerations in the Current Environment
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% J u n -7 6 A u g -7 8 O c t- 8 0 D e c -8 2 F e b -8 5 A pr -8 7 J u n -8 9 A u g -9 1 O c t- 9 3 D e c -9 5 F e b -9 8 A pr -0 0 J u n -0 2 A u g -0 4 O c t- 0 6 D e c -0 8 F e b -1 1 A pr -1 3 Y ield ( % ) 10-year 5-year 2-year Considerations in the Current Envir
Slide 108: Low Yield Environment: Mitigation
108 Risk Mitigation Low Yield Environment: Mitigation We are diversifying sources of investment income while maintaining quality Low Yield Environment CMBS CLO Debt Emerging Market Debt Dividend Yields Short Duration High Yield
Slide 109: Exposure to Rising Rates: Mitigation
Exposure to Rising Rates: Mitigation 109 We are maintaining our short duration and investing in assets which should benefit in an inflationary environment Exposure to Rising Interest Rates Inflation Linked Securities (TIPS) Increased Risk Assets: Equities Hedge Funds High Yield Maintain Short Durati
Slide 110: High-Quality, Liquid Investment Portfolio
High-Quality, Liquid Investment Portfolio 110 Current investment portfolio is well-positioned to cope with today’s risks, maximizes flexibility and maintains high quality (1) As of 03/31/2013. Cash and Investments(1) $14.5 Bn Fixed Maturity Credit Quality(1) $12.0 Bn 82% 4% 7% 1% 6% Fixed Maturities
Slide 111: Conservative Reserving
57.3% 23.1% 30.7% 42.7% 76.9% 69.3% 0% 20% 40% 60% 80% 100% Short/Medium Tail Medium/Long Tail Long Tail Case IBNR Conservative Reserving 111 Net Unpaid Loss Reserves as of 12/31/2012 Net Reserves $2,558M $2,482M $2,193M $1 $56 $182 $383 $217 $337 $376 $423 $313 $258 $245 $0 $100 $200 $300 $400 $500
Slide 112: Strong Capitalization with Prudent Leverage
Strong Capitalization with Prudent Leverage 112 $500 $500 $500 $500 $503 $503 $628 $499 $500 $994 $995 $995 $995 $995 $3,961 $5,000 $5,125 $4,944 $5,277 $5,387 $5,380 $4,960 $6,000 $6,619 $6,439 $6,775 $6,885 $7,003 $0 $2,000 $4,000 $6,000 $8,000 2008 2009 2010 2011 2012 Q1 2013 Q1 2013 Pro Forma* C
Slide 113: Track Record of Efficient Capital Management
-$2,000 -$1,500 -$1,000 -$500 $0 $500 $1,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 Net Cumulative Capital Raised/Returned Shares Repurchased Common Dividends Common Equity Raised Track Record of Efficient Capital Management 113 Common Equity Raised Dividends & Share Rep
Slide 114: Recent Contributions to Value Creation
Recent Contributions to Value Creation 114 (1) Impact of share repurchases estimated quarterly by recalculating opening diluted book value per common share after adjusting the numerator and denominator, respectively, for the value and number of shares repurchased in the quarter. 12/31/2009 3/31/2013
Slide 115: Dividends Consistent Component of Return
$0.14 $0.50 $0.60 $0.615 $0.68 $0.755 $0.81 $0.86 $0.93 $0.97 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Dividends Consistent Component of Return 115 2004-2012 CAGR = 8.6% Competitive dividends grown every year since we began p
Slide 116: Capital Management Strategy
Capital Management Strategy 116 Stress & Scenario Testing Maintain Buffers Commensurate with Current Ratings AXIS Capital Management Strategy Internal Capital Adequacy Regulatory Capital Adequacy Rating Agency Leverage Capital objectives and tolerances Methodology, monitoring and reporting Capital M
Slide 117: Balancing the Interests of All Stakeholders
Investment portfolio well-positioned for current environment Conservative reserving Good steward of capital Balancing the Interests of All Stakeholders 117
Slide 118: What You Heard
What You Heard 118 Underwriting Excellence Underpins Sustainable Differentiation Strength, Depth and Focus of Global Specialist Franchises Diversifying Growth and Enhanced Portfolio Construction Proven AXIS Approach to Strategic Initiatives Strong Balance Sheet and Prudent Steward of Capital
Slide 119: Question & Answer Session
Question & Answer Session