AXIS Capital Holdings Limited (NYSE:AXS) Q3 2025 Earnings Call Transcript

AXIS Capital Holdings Limited (NYSE:AXS) Q3 2025 Earnings Call Transcript October 30, 2025

Operator: Good morning, and welcome to the AXIS Capital Third Quarter 2025 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Cliff Gallant, Head of Investor Relations and Corporate Development. Please go ahead, sir.

Clifford Gallant: Thank you. Good morning, and welcome to our third quarter 2025 conference call. Our earnings press release and financial supplement were issued last night. If you would like copies, please visit the Investor Information section of our website at axiscapital.com. We set aside an hour for today’s call, which is also available as an audio webcast on our website. Joining me on today’s call are Vince Tizzio, our President and CEO; and Pete Vogt, our CFO. In addition, I would like to remind everyone that the statements made during this call, including the question-and-answer session, which are not historical facts, may be forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions.

Actual events or results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors set forth in the company’s most recent report on the Form 10-K or our quarterly report on Form 10-Q and other reports the company files with the SEC. This includes the additional risks identified in the cautionary note regarding the forward-looking statements in our earnings press release issued last night. We undertake no obligation to publicly update or revise any forward-looking statements. In addition, our non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement. And with that, I’ll turn the call over to Vince.

Vincent Tizzio: Thank you, Cliff. Good morning, and thank you for joining our call. In the third quarter, our team once again delivered excellent results as the momentum in our performance further accelerated. The transformation we have undertaken has now demonstrated sustained profitable growth, underpinned by an enhanced operating platform with new capabilities, products and a highly focused team. In the quarter, we delivered a 14% year-over-year increase in diluted book value per common share at $73.82, 18% annualized operating return on equity, 20% increase in operating earnings per share over the prior year quarter at $3.25. Premiums of $2.1 billion, our highest third quarter ever, up nearly 10% over the prior year, including $670 million in new business.

And finally, a combined ratio of 89.4%. We are achieving these results in a changing risk landscape with many different micro markets at play. Our strategy positions us well to compete in this environment. Premium adequacy across our aggregated portfolio is solid. We are actively cycle managing and leaning in where it is prudent. The investments we’re making in people, products and platforms are creating value. Indeed, the further acceleration of our premium growth in insurance is bolstered by our new and expanded lines of business. Additionally, we continue to draw upon third-party capital partnerships while bringing innovative product capabilities to meet the diverse needs of our distribution partners. By example, we launched AXIS Capacity Solutions, which during the quarter, transacted its first deal, a partnership with Ryan Specialty.

Through our How We Work program, we are continuing to strengthen all aspects of our operations and how we go to market. In the quarter, we made continued strides in modernizing our underwriting platform while leveraging emerging technologies and AI to drive efficiency, improve decision-making and support scalable growth. I’ll share several examples. We’ve implemented a highly modern application platform across all business units and functions with very little legacy technology that is improving speed to market, heightening accuracy and reducing manual effort and cost. We are presently applying AI solutions in all forms, custom and package within applications on user desktops and in all cases, driving productivity increases. We’ve deployed the first release of our next-generation underwriting platform in North America, advancing how we ingest, route and review submissions while enhancing our overall efficiency.

These advancements reflect the pledge that we made at our Investor Day to invest $100 million into our operational infrastructure. Capitalizing on our excess capital position, we have been accelerating and expanding these efforts, particularly in supporting our new business lines. We see these investments as a key to advancing our profitable growth ambition. We are also deepening our relationship with our distribution partners. In a broker survey conducted this year, our customers recognize AXIS with top quartile Net Promoter Scores while distinguishing our company for its specialty leadership and ranking us ahead of the market for our underwriting knowledge and solutions-oriented approach. None of these results can be achieved without a highly engaged and disciplined team.

The AXIS culture we’ve developed and deep commitment of our people is exciting and enabling our progress. During the quarter, we have added talent to our underwriting teams throughout the globe. And on the corporate side, we notably announced Matt Kirk as our future CFO, succeeding Pete. Let’s now dig deeper into our segment results. We’ll start with insurance. Our insurance segment again delivered an outstanding quarter, highlighted by record third quarter premium production of $1.7 billion or 11% over the prior period, new premium written of $570 million, a current accident year ex-cat combined ratio of 83.3% and record underwriting income of $153 million, up 55% over the prior year. In North America, we produced stellar results with premiums up 12% and submission volume up 18% in the quarter as we continue to capitalize on the investments we’ve made in expanding our product offerings and in enhancing our underwriting platforms, yielding greater efficiency gains.

Our lower middle market strategy is generating sustained acceleration and strength in value. In our Global Markets division, results were strong, and premiums were up 9%. In the quarter, our growth came from lead product positions in the London market, notably marine, energy and construction. Importantly, these classes remain premium adequate and have a robust pipeline. With respect to broader market conditions within insurance, we continue to observe an evolving risk environment. But overall, the competitive landscape is disciplined. Let’s unpack this further for AXIS. In liability, rates were up 10% in the quarter with 8% growth. We generated a 12% rate increase and a 11% growth within our U.S. excess casualty business. Within this business, we continue to lean into the highly premium adequate wholesale lower middle market segment.

Our casualty portfolio is well managed and within wholesale distribution, our excess casualty unit is recognized for its thought leadership and disciplined underwriting. As respect to property, we grew our property book 8% with rate changes varying widely across our many classes. Illustrating this, we see greater competition in large account E&S business but are still observing rate increases in small account business in our international book. We serve customers through 8 property underwriting units across the world, which are all seeing different degrees of competition, and we benefit from the diversity of our customer segmentation in these units. An increasing contributor is our lower middle market property unit, which evidenced continued growth in the quarter.

Our property underwriting strategy remains disciplined and enjoys premium adequacy and average net limit in the low single digits, a well-balanced peril and geographic mix and is backed by a [ cat XOL ] protection that attaches at $100 million per event. In Professional, we grew 18%. The majority of our growth came from transactional liability and E&O. We are encouraged by the increasing contributions that we are continuing to see from our new and enhanced product offerings, including Design Professional, Allied Health and Environmental. As respect to management liability, we continue to drive reasonable growth within our private D&O business. As respect to public D&O, consistent with the last quarter comments, we continue to observe that pricing is flattening out.

Within cyber, we observed industry ransomware attacks as increasing, but thus far not being reflected in our claim counts. That said, we are seeing the increased competition of MGAs and surplus capacity have placed unwarranted downward pressure in pricing dynamics. We have maintained our underwriting discipline, which is reflected in our selective approach in the quarter. In addition, we have now completed the reshaping of our delegated cyber book. We are strengthening our capabilities in our cyber risk advisory services, which help policyholders increase their organizational preparedness and resilience. We are focused on strengthening our SME presence globally and notably in the United States through our partnership with Elpha Secure. As respect to our reinsurance business, we continue to generate strong bottom line performance with our seventh straight quarter of consistent profitability.

Our reinsurance underwriting strategy remains highly disciplined and focused on select specialty lines. In the quarter, we produced 6% premium growth. Specialty short-tail lines contributed 91% of our new business premiums, a combined ratio of 92% and underwriting income of $35 million. Reflective of our disciplined approach, we are increasingly vigilant in navigating liability and professional lines. Consistent with past comments, we generally do not view ceding commissions nor the rate environment for these lines, particularly in North America to be in keeping with our return expectations. Taken together, this was another strong quarter for AXIS. Across the micro markets of specialty insurance and reinsurance, we see an increasing need for tailored risk solutions.

Thus, we see AXIS is very well positioned to support our customers and importantly, our distribution partners, while at the same time, rewarding our shareholders with sustained and attractive returns. We are building on our momentum. We are leveraging our capital position, the talent of our team and the support of our distribution partners to lean into our new and expanded lines as well as identifying new avenues to drive profitable growth. We are investing in our infrastructure and operations, embracing technology and AI. We’re excited for our future, and we believe the best is yet ahead for AXIS. And with that now, I’ll pass the floor to Pete for his comments.

Peter Vogt: Thank you, Vince, and good morning, everyone. AXIS had another excellent quarter. Our net income available to common shareholders was $294 million or $3.74 per diluted common share. And our operating income was $255 million or $3.25 per diluted common share, producing a 17.8% annualized operating return on common equity. This drove our book value per diluted common share to $73.82 at September 30, an increase of 14.2% over the past 12 months and up 16.9% when adjusted for dividends declared. I’ll start with consolidated company underwriting highlights. Our gross premiums written of $2.1 billion were up 9.7% over the prior year quarter, driven by accelerating growth initiatives in insurance. On a net basis, premiums were up 9.5%.

Our combined ratio was an excellent 89.4%, and our accident year loss ratio ex-cat and weather was 56.3%. Cat losses were just $44 million, producing a cat loss ratio of 3%. Cat losses were driven by a combination of a $24 million impact primarily from severe convective storms in the United States and $20 million of losses related to the Middle East conflicts, which hit our marine and terrorism lines. We adhere to our philosophy of wanting to see sustained positive signals before releasing reserves. And we recorded a release of $19 million with $15 million in insurance and $4 million in reinsurance in the quarter. We continue to believe we are strongly reserved, and we rely upon a great deal of data and analysis to reach our conclusion. For example, from a high level, statistics like IBNR to total reserves are holding steady, continuing to give us confidence.

Our consolidated G&A ratio, including corporate, was 11.7%, down from 12.1% a year ago. We continue to execute on our How We Work program, including investing in our business with new technology and adding underwriting teams. The investments we’re making give us increased confidence that we will manage costs, grow the premium base and hit our full year 2026 target of an 11% G&A ratio. Now let’s move on and discuss our segment results in more detail. Insurance had a strong quarter. Gross premiums written were $1.7 billion, a record third quarter for insurance and an increase of 11% compared to the prior year quarter. The strongest driver has been the continued momentum of our new and expanded initiatives. These initiatives contributed nearly 70% of the growth in the quarter.

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

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

In addition, we will earn fees on ceded earned premiums. The total volume will be a function of the growth rates of the underlying underwriting entities. And I would stress that this transaction is done on an underwriting year basis, which means a slow buildup of revenues in 2026. The insurance combined ratio was an outstanding 85.9%. The quarter included 3.9 points of cat and weather-related losses and 1.3 points of reserve releases from short-tail lines. Now let’s move on to the reinsurance segment, where the business has continued to deliver stable, consistent and strong profitability. We grew 6% as we found opportunities to grow in credit surety lines as well as the agriculture business. In liability, we continue to be cautious, but this quarter benefited from a higher level of positive premium adjustments versus the prior year.

The reinsurance combined ratio was 92.2% with an ex-cat accident year loss ratio of 67.9%. Cats were just 0.3 point with just over 1 point of benefit from the reserve releases. As we have done all year, we are taking a cautious stance to booking our reinsurance loss ratio while continuing to deliver consistent profitability. We had a very good quarter for investment income at $185 million. Our outlook for investment income remains favorable as we continue to generate excellent operating cash flow, which was $674 million in the quarter, and is driving growth in our asset base with a market yield of 4.8% is above our 4.6% book yield as of September 30. Our effective tax rate of 18.9% in the quarter reflects the geographic mix of our profits as we continue to generate outstanding results in our U.S. operations.

We remain in a very strong capital position. We have returned substantial capital to our shareholders this year as we have completed $600 million of share repurchases and declared $105 million in common dividends. And we recently passed a new repurchase authorization for $400 million. I would reiterate that our priority use for capital is to fund profitable growth and to invest in the business. Our excellent financial results continue to demonstrate the hard work and commitment of our team to make us the leading specialty insurer in the world. We’re tremendously excited for the future. And with that, operator, we’d be happy to take questions.

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

Q&A Session

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

Vincent Tizzio: Yes. Andrew, this is Vince. I’ll start, and then Pete will come over the top. Please allow me as well to express on behalf of AXIS to all those in the path of Hurricane Melissa, our best wishes and speedy recovery as we are watching that, obviously, with good care. But direct to your question, we had 8-odd percent growth in our property line in the quarter. As you indicate, Pete and I detailed, it’s important to play some context around this growth. First, we’re letting that this growth in our judgment comes from an extremely solid starting point of premium adequacy. Second, a well-constructed portfolio with respect to limit/peril mix. Importantly, in our insurance business, 40-odd percent of our property business is noncritical cat, and our lower middle market growth was exceptional in the quarter.

All of these have a different gearing effect against what you point to on the rate change, which in and of itself really doesn’t address the start point of our premium adequacy. As you know, we’ve been working very hard over the past several years at reducing the cat profile of our company generally and within insurance, I think that we’ve shown that ability. And so taken together, that is exactly how we’re able to produce the kind of results that we are. I’ll finally note that, recall please that we go to market in property through 8 different entities around the world, and we’re attracting different customer segmentations, industry groupings and obviously, geographic dispersion. And so we feel great confidence in the integrated approach that we’re taking with our actuarial team, our claims team and certainly our underwriting leadership principally led with Mike and Sara in our insurance business where this growth is occurring.

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

Peter Vogt: Yes. Very much appreciate the color on property. And I think that gets to your question there, Andrew. I think also inherent in your question is as you’re looking at the insurance loss ratio of 52.3% and how is that kind of staying nice and consistent given what is some pricing pressure out there. I think what I would note is Vince has said this many times, we necessarily can’t control the market, but we can control mix. Underlying that, I would say we’ve seen our underwriting loss ratios by our lines of business and business classes actually. We’ve actually shown the effect of rate and trend there where we’ve seen some increase in the underlying loss ratios, but that has actually been offset by mix. And if I look year-to-date, especially year-over-year, we’ve got a higher proportion of the short-tail lines of business, which tend to have a smaller — a lower loss ratio.

So underlying, we are reflecting rate and trend in what we’re seeing in the markets in our underlying classes of business and the loss ratio. But the mix of business has changed such that, that’s kind of offsetting the pressure we’ve seen. And that has allowed the loss ratio in the ex-cat loss ratio in insurance to stay very consistent.

Andrew Kligerman: Great. And then maybe shifting over to third-party capital — AXIS Capacity Solutions. That first deal with Ryan seem very exciting, very promising. Could you talk a little bit about the potential for more deals like that? Are you looking at a lot of them? Is there a pipeline out there that you’re seeing?

Vincent Tizzio: Yes. Andrew, I’ll start. This is Vince again. Thank you for your question. AXIS Capacity Solutions we formed earlier this year, really in recognition of an emerging trend that we’ve observed in wholesale distribution relating to cross-class, cross-geographic opportunities. And in the case of Ryan Specialty and specifically RAC Re, this was an illustrated example where AXIS participated on about 1/3 of the MGUs within the Ryan Specialty organization. We had the opportunity to curate and participate on the select remaining MGUs that come to market from that very strong partner of ours. We agreed to do so with some careful deliberation around the portfolio makeup, the underwriting terms and conditions. At the same time, we assisted in the facilitation of a sidecar with the strength and belief on the prior comments we’ve made in any instance relating to delegated to work as hard as we can to align economic interest.

We believe that the sidecar was a perfect example wherein AXIS receives a fee from the sidecar and the profitability trigger for Ryan Specialty is only satisfied after the profitability of the underlying business is met. And so we thought this was an appropriate transaction for us to lean into an existing channel of distribution that we have, a recognition of the underlying portfolio, an alignment of economic interest and ability to have our hand in the claims control of the underlying business and to ensure that we have transparency in the information. As it relates to the second part of your question, this transaction has no doubt spawned increasing interest from a variety of partners around the world. And yes, there is a pipeline. And critically important to Pete and myself is that we maintain the underwriting adherence from the lessons we learned in our own reserve charge relating to the delegated book that we had back in December of ’23.

We are leaning into the principles that we’ve previously outlined for when we engage in delegated underwriting authority and most importantly, we have satisfied ourselves on the alignment of interest, which is critically important to us.

Operator: The next question will come from Elyse Greenspan with Wells Fargo.

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

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

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

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

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

Peter Vogt: Yes. I’ll ask Vince to chime in on that. But we did buy back $110 million in the third quarter. Again, our philosophy is we are going to look at growing the business first. We do want to see organic growth, and we’re going to invest in our platform. As Vince talked about, we’ve been doing a lot on the technology side with regard to improving ourselves as we go to market with our distribution partners and clients. Having said that, I would not look at $110 million in a quarter as any kind of run rate. As we said, we’re going to be opportunistic on our buybacks. We’re not going to be held to any specific number quarter-to-quarter. We have a new $400 million authorization, and we’ll look to use that as we go forward based upon how we look at the business, where we see the growth coming from as well as where we think we’re trading on any given quarter. And with that, I’ll ask Vince to chime in on that.

Vincent Tizzio: Sure. The only thing I would come on over the top with Pete is, Elyse, you know that we’ll continuously evaluate our capital position assuring ourselves that it’s aligning shareholder interest with balancing the prudent risk management approach that we’ve taken. You know the chief source of using our capital will be inside the operating model. We expressly indicated an acceleration of expenditure in our technology and data analytic infrastructure. The continued hiring of persons in the quarter, discrete. We hired over 140-odd persons into the organization. And so we continue to invest. We’re very pleased with the assimilation of our new colleagues that are supporting the growth that you’re evidencing from us.

So we’ll maintain our course. We’re not going to sort of guide on the order of magnitude of buybacks. We will use them opportunistically, as Pete has said. We’ve shown that through this calendar year over $600 million or approximately $600 million just in this operating year. So I’ll leave it there.

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

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

Vincent Tizzio: Josh, this is Vince. I’ll start out. Thank you for your question. We commented last quarter, the first instance that you saw a paid to incurred in an elevated state that we look at this [ indice ] really over a continuum of time. And I thought it really appropriate this quarter to unpack sort of our point of view and our learnings of what this ratio really means. We think, frankly, it is only one of many points that you look toward in terms of confidence in the health of the portfolio, the health of our reserves. And we think there’s a few underlying factors that you’ll continue to see evidence in the AXIS journey. Josh, when we indicate going on a transformation, we talk about the mix shifts in our underlying portfolio, long tail versus short tail.

You’re seeing AXIS with more than 50% in short tail. You see large losses from time to time arise inside a specialty organization, though decreasing in the last few years here at AXIS from time to time will evidence some of them. Third, you see timing differences between when we’re paying some of these large losses and when they were originally a case reserved. And finally and perhaps most critically, from my learned point of view, whenever you undertake transformation and you make changes in your claims organization, including not only numbers of persons, the skills of those persons, the creation of newer capabilities in the form of complex claims organizations, shared service organizations, you invariably will get some form of acceleration.

And so taken together, I would tell you expressly on behalf of AXIS that we’re very comfortable with what we’re observing. We would not be surprised to see if there are additional quarters reported where paid to incurred seems elevated. And overlaid with some of the statistics that Pete shared with you that we look at equally and importantly, with a critical eye, we feel very comfortable. Nonetheless, we appreciate the interest in the question. And you also referred to this notion of growth. Again, we’re happy to unpack where the growth is coming from, what the line of business distinction is in terms of short tail versus long tail, what size customer it is and what kind of profit profile we believe it holds out. With that, I’ll ask Pete if you’d like to come over the top with any additional comments.

Peter Vogt: Yes. I think I would, josh, a couple of things just to point out. One, I appreciate the question. Getting to the heart of some of the question, we do want to say we’re very comfortable in the strength of our insurance reserves. And we do review a multitude of metrics each and every quarter to give us confidence in those reserves. So it’s not only paid to incurred, but we were looking at, as I mentioned, IBNR to total reserves, paid to ultimate factors, incurred to ultimate factors. And we look at these all by line of business as well as by duration. And then looking specific to this quarter, when we look at the paid to incurred ratio, a couple of things we’re seeing is, one, we are having significant improvement in our claims organization in North America because as we’ve talked about through How We Work, it’s all across the company.

And in our claims organization and insurance in North America, we’ve actually seen an improvement where our closing ratios, that’s paid to new claims has actually improved from 98% last year to 118% this year. So we’re getting after more of the claims. We’ve seen some of the courts open up. We closed some claims, most importantly, those paid claims we paid in the quarter and some were material, especially in the FI book, and these are all pre-2019 claims. They were fully reserved for. So there’s been no surprises on the reserve front that we’ve seen. So overall, we feel really good about where our claims organization is improving and evolving to, and we feel very good about the level of the reserves on our balance sheet.

Operator: The next question will come from Matt Carletti with Citizens.

Matthew Carletti: I just had a small cleanup question on the reserves. Pete, you talked about the — it wasn’t a huge number, but I think the $19 million of favorable in the quarter, $15 million in insurance, $4 in reinsurance. Can you just talk a little bit about where that came from? This was a more short tail, long tail? And were there any bigger moving pieces behind the scenes? Or was it just pretty kind of nothing to see here and just a [ broad small ] favorable?

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

Operator: The next question will come from Charlie Lederer with BMO Capital Markets.

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

Peter Vogt: Yes, it’s a great question, Charlie. As we look forward to next year, obviously, it’s going to be very dependent upon what we see in the markets and where rate trend goes from here as well as right now, we have a really good property in the quarter, but we’ve also seen really good growth in our long-tail lines. So — as I look forward to next year, I wouldn’t necessarily want to give a number for next year, but we feel really good about where we are in insurance. But as the mix changes, that will impact the loss ratio next year. Again, overall, we look at the combined ratio, some of our longer-tail lines have really good acquisition costs associated with them. So we’re feeling really good about the overall insurance segment as we go into next year.

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

Peter Vogt: Yes, Charlie, this is Pete. I appreciate the question. As we sit here through 9 months, we’ve done really, really well for our shareholders and got to complement the AXIS team for all the work they’ve been doing, not only with light cats, but as we think on an ex-cat basis, still able to grow the underwriting income and a really good ROE as we look at the ROE year-to-date at about 18.2%. So as we think about the end of the year, given we still think really good, and we’re very confident about the fourth quarter, my expectation is we could [ be some ] reward for our teams as we go into the fourth quarter. So you may be looking at like what we did last year as consistent with what we might be doing this year. But really, really appreciative of the team overall for all the great work they’ve put in to create the results we’ve got this year so far.

Operator: The next question will come from Jing Li with KBW.

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

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

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

Vincent Tizzio: I have data on the latter part of the questions. On the former, I have to search and see if I have the exact retention because, again, this is a renewal rights transaction. It wasn’t part of our renewal base in the prior period. In terms of the acquisition or the hit ratio of what is coming over for potential retention, it’s probably around half of what — of the total, which would be in keeping with our expectation. We wouldn’t expect reasonably to accept every renewal that’s coming over. In terms of pricing, it is aligned with our expectations within the broader FI portfolio, which is a very strong portfolio for AXIS, well managed and historical for us. We’ve been in the business a long time.

Operator: The next question will come from Andrew Andersen with Jefferies.

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

Vincent Tizzio: This is Vince. I apologize, Pete. Within insurance, we’re very pleased with our A&H business. It is predominantly driven by our pet business, which is a partnership business with Fetch. That was the predominant driver of growth in the quarter and will be for the year. Additionally, we’ve spoken in prior quarters about measures we were taking to support our other companion divisions within A&H, notably out of London market and Lloyd’s. We have a very strong group there that is performing well, continuing to grow double digits, performing profitably. Further, we’ve reshaped our AXIS group benefits business over the last several years. It’s been repositioned. It’s in the phase of really executing its new underwriting strategy.

There, again, it demonstrated growth. But off of the total basis, it’s really driven by pet. The outlook for pet for us remains favorable, though Pete would describe because of what he detailed in the first or second quarter, I can’t quite recall the reinsurance change. That level of GWP growth will dissipate, but the net will continue to be strong for AXIS. And certainly, most importantly, we like the profit outlook of that business.

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

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

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

Vincent Tizzio: Yes. We noted expressly that we’ve accelerated the expenditure. That number certainly in the period that we talked about will probably approximate $150-odd million over the 3 years. In terms of its efficiency, no doubt. You should see efficiency gains on the expense ratio. In the quarter, discrete, just looking at North America, we’re pleased with the early insights that shows improving quotes that are up about 27% year-over-year discrete 3Q ’25 versus ’24. Buyings are up about 19%. And so in the businesses that have had the effectuation of our technology enhancements, we are seeing individual productivity gains. We think that’s going to continue to get stronger. The partnership between our How We Work organization led by Ann Haugh and Michael McKenna, who leads North America, will only get better over time.

We’re seeing a number of proof points, whether it be between the operations relationship with underwriting, the insights from actuarial being made more quickly into the underwriting. These are all going to show increasing propensity of buying and efficiency in how we go to market. So we’re pretty optimistic.

Operator: The next question will come from Brian Meredith with UBS.

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

Peter Vogt: Yes. Brian, this is Pete. We’re keeping our eye on that. Right now, it’s always a bit early to tell. I’m going to mention that on the quantum, but we should be getting some benefit. But I mean, the consultation paper is out. We’ve submitted comments back to the government. We worked with the industry to do that. We should get some substance-based tax credits to see what they are. It’s going to depend upon what the final legislation is. We should expect to see that mid-December or so. So we’ll obviously have more to say about that on our fourth quarter call. If you recall or if you’ve looked at it, there’s kind of a transition timing on that, too. So it may be some benefit in ’25. It will go into ’26. But we should get some associated with that. Obviously, our footprint on the island is not as big as others. And so our benefit — it will be beneficial to us, but hard to say where the quantum is today.

Brian Meredith: Great. And I’m assuming that’s a benefit to your G&A expense ratio.

Peter Vogt: Yes, that would actually flow through G&A because that actually would show up as tax credits against the payroll. So it definitely would go through G&A on the substance basis, yes.

Brian Meredith: Great. Second question, and just — I don’t want to bring this up again, but the paid to incurred loss ratios. Pete, you mentioned some large claim payments, right, that kind of skewed it maybe the last quarter or 2 in the insurance segment. Is there any way to kind of ballpark what those were and maybe it gives us a better kind of a run rate paid to incurred ratio when we strip out those large claims activity?

Peter Vogt: Yes. One, I would say, a lot of them were central to our FI book really, and they’re actually coming from 2019 and prior. When we look at how big they were, there were a couple that were in there on a gross basis, Brian, in excess of $20 million. So when we look at it in total, just that line of business, the top 3 claims had in excess of $50 million worth of pay in the quarter. So that actually skews it a bit. And then last year — actually, interestingly, Q3 last year, it just happened that in the quarter, we got about $20 million of recoveries from our reinsurers in the quarter, which depressed the number last year in the quarter. But overall, I think what’s really important as we think about the paid to incurred especially, a lot of improvements in our claims organization.

Megan Watt and her team are really embracing how we work and putting better processes into place. So in North America insurance, where we’re seeing actually the close to new claims being at 118%, that’s really quite good, especially since we’re closing these claims within any reserves we had already been putting up.

Brian Meredith: Got you. And then I guess last one, too, maybe this is more for Vince, the RAC Re deal. Maybe give us a little bit of color on kind of what do you think the margin profile of that business is going to look like and the kind of makeup of kind of the business you’re expecting to receive since it’s [ Lloyd’s of London pipe ] business.

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

Operator: The next question will come from Robert Cox with Goldman Sachs.

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

Vincent Tizzio: I think what we’ll say in this regard is, one, we’re not going to lay out our playbook of exactly where the lines are coming from. But suffice to say, we have great confidence in the continued growth trajectory of our new and expanded initiatives in the quarter, discretely, they contributed meaningfully against the $165 million of our overall insurance growth. You know from our prior disclosures, we are a market leader in marine and energy segments of professionals, certainly within the wholesale, excess casualty, marketplace, the property marketplace and increasingly in the lower middle market. And so taken together, alongside our niche, highly defined delegated relationships in surety and in pet, we think that there’s ample growth within these lines to reveal itself in ’26.

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

Peter Vogt: Yes, this is Pete. So I would tell you that if we look — to your point, if we look year-to-date, the short-tail lines are up 60% — or at 60% versus 57% last year. But in the quarter, it was 59% versus 58%. So very close, but down a little bit as we think about it on an earned basis. But the other thing that’s also going on is we are seeing some adjustments within SEC classes, for example, in the political and credit risk, where we’re writing more surety business, which has a lower loss ratio. So it’s going to be hard to see overall. But as that mix ebbs and if we do write, as you note, more long-tail business, that might have a higher loss ratio. Again, I’d point to the combined ratio we’ll look at because some of those lines have lower acquisition costs associated with them, and we feel good about the combined ratio going into next year. And that’s kind of what I — why I pointed that out.

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

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

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

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

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

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