Axis Capital Holdings Ltd Q1 FY2023 Earnings Call

Good morning, and welcome to the AXIS Capital First Quarter 2023 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Miranda Hunter, Head of Investor Relations. Please go ahead.

Thanks, Chad. Good morning, and welcome to the AXIS Capital First Quarter 2023 Conference Call. Our earnings press release and financial supplement were issued yesterday evening after the market closed. If you would like copies, please visit the Investor Information section of our website at axiscapital.com. Joining me on today's call are Albert Benchimol, our President and CEO; Vince Tizzio, CEO of Specialty Insurance and Reinsurance and our future group CEO effective May 4; and Pete Vogt, our CFO. Before we begin, I would like to remind everyone that the statements made during this call including the question-and-answer section, 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 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, this presentation may contain non-GAAP financial measures. Reconciliations are included in our earnings press release and financial supplement. And with that, I turn the call over to Albert.

Thank you, Miranda. Good morning, and thank you for taking the time to join us today. Welcome to our first-quarter investor call. As we'll discuss shortly, this was a strong quarter for AXIS. And it gives me comfort to hand over the reins, after nearly 13 years with the company, feeling very positive about the progress that we've achieved and where the company is today. And I feel even better about its future. Following years of hard work to reposition AXIS to be a more focused specialty underwriter with lower volatility and steady profitable results, we're seeing demonstrable improvements and growing consistency in our performance. This quarter marked yet another period of progress in generating meaningful underwriting income, highlighted by solid results across our core metrics. An all-in combined ratio of 91, operating income of $200 million, and record operating earnings per common diluted share of $2.33. During a quarter where the industry was impacted by heightened cat activity, we demonstrated the resiliency of our portfolio with total cat losses of $38 million or 3.1 points of cat loss ratio. This compares to our 5-year average first-quarter cat loss ratio of close to 4.5 points, excluding COVID and the war in Ukraine. Moreover, we achieved robust premium growth across most attractive lines, buoyed by a general resurgence and rate momentum sustaining profitable pricing. These results speak to the actions that we've taken in recent years to concentrate our resources and capital on growing a less volatile and more profitable specialty insurance business as well as targeted specialist reinsurance lines, building our brand, and investing in attractive growth opportunities. We continue to focus on shifting our portfolio mix, which should be close to 75% specialty insurance and 25% reinsurance this year. Indeed, as Vince will discuss shortly, during the quarter, we continued to see excellent performance within our core specialty insurance segment, and we continued to reshape AXIS Re as a specialist reinsurer writing risks that are accretive to the broader AXIS portfolio. Another item that I was pleased to see during the quarter was investment income growth of 47% year-over-year. Our coupon bond income almost doubled over the prior first period, contributing to a healthy bottom line. And as our relatively short bond portfolio matures, we should be able to reinvest the maturity proceeds at a better rate, driving even greater investment income going forward. In short, the totality of our business is moving in the right direction. As we look to the future, AXIS' leadership positions in some of the most attractive markets in the industry, we're writing the business that we want to write. And we're very well positioned to drive further profitable growth. In addition, we've been recognized as the best place to work in the industry in both the U.S. and London markets and have received a number of recognitions for our commitment and progress in our corporate citizenship and diversity, equity, and inclusion initiatives. These very strong cultural attributes have aided us in attracting and retaining superior talent to our company, and this gives me even more confidence in our team and our future. I do want to be clear, there is still a lot more that we can and must do to realize the company's potential to grow small account business and drive further growth across all attractive lines, improve our efficiency, and leverage digital and data analytics to make better decisions faster, all making up the critical steps forward for AXIS to realize our ambition of becoming a specialty leader within the industry. And I believe we have the right leader in Vince Tizzio to guide us there. In Vince, we have a great leader who has the vision, specialty insurance knowledge, grit, and tenacity to guide our team to build on the strong foundation that is in place and take AXIS to even higher levels of success. It gives me great confidence to know that I'm leaving AXIS in such capable hands. And with that, I'll pass the floor to Vince, who'll provide more color on the business. And then we'll go to Pete Vogt, who will review our financial results in detail. After which, we'll be very happy to take any questions you might have. Vince?

Thank you, Albert. On behalf of your teammates, we sincerely appreciate your leadership. I am honored to take over your role. Let’s review our performance for the quarter. Our first quarter results have provided a strong start to the year for AXIS. This quarter's performance reinforces our conviction that we are on the right path to becoming a consistent provider of exceptional value to our stakeholders. Market conditions are generally favorable, but there are factors of economic uncertainty, recent disruptions in the global financial banking sector, and a high level of global catastrophe activity in the first quarter. Looking at our combined underwriting businesses, I want to highlight a few key themes before discussing each segment individually. Throughout the quarter, we effectively implemented several underwriting strategies. Notably, both underwriting segments achieved rate increases surpassing loss costs, with insurance at 9% and reinsurance at 12%. In our insurance segment, we achieved record first-quarter production of $1.4 billion, including a 9% rise in new business premiums, aligned with our targeted growth markets. AXIS has remained vigilant in terms of pricing and risk discipline. For example, we reduced our public commercial D&O business due to inadequate pricing for the risks involved. In reinsurance, we continued implementing our stated strategy, repositioning AXIS Re as a focused, specialist reinsurer that generates consistent profits with a more stable portfolio. As Albert mentioned earlier, we made progress in key leadership roles, such as hiring Megan Watt as our Chief Claims Officer and Chief Operations Officer for our underwriting businesses. Together, these actions underscore our commitment to executing our underwriting strategy. Now, turning to our underwriting segments. In the first quarter, our insurance segment again reported strong results, achieving a 7% premium growth and an all-in combined ratio of 87, with an ex-cat current accident year combined ratio of 85 and an underwriting profit of $103 million. We saw robust premium growth in the teens or better in our wholesale, cyber, accident and health, and London-based international divisions. Notable growth was observed in our marine, credit and political risk, and construction lines. Gross written premiums for property increased by 24% this quarter, with significant contributions from our global property units. By accessing the property market through our wholesale insurance book, which is written on a nonadmitted basis, we believe we can leverage the market opportunity while adhering to our underwriting standards and volatility targets. However, gross written premiums in professional lines fell 27% due to a significant reduction in transactional liability business linked to diminished M&A activity. This trend is also driven by the unattractive pricing environment in our commercial public D&O business. Excluding professional lines, we demonstrated proper underwriting discipline based on market conditions, achieving 17% growth across the rest of our insurance book. We believe our portfolio in most lines of business is well-priced and positioned for profitable growth. Additionally, the 9% rate increase this quarter marks the 22nd consecutive quarter of positive rate change. Importantly, these rate results not only cover our loss cost trends but also accommodate select increases in outward reinsurance. Turning now to our reinsurance segment, our team continued to shift the business towards a more focused specialist reinsurer, targeting lines that enhance our broader specialty portfolio strategy. For the quarter, we achieved a combined ratio of 91% and an underwriting profit of $36 million, which is a solid outcome as we transition to specialization. We generated gross written premiums of $966 million, down 26% from the previous year, reflecting a decrease of about $340 million in renewal availability compared to last year. We maintained a premium retention rate of 83%, opting not to renew business we deemed non-accumulative to our portfolio, while renewed business achieved an average rate increase of 12%. We also produced $80 million in new business, including credit and surety, cyber, and accident and health. Our April renewals echoed similar trends as in Q1, showing ongoing positive rate momentum of about 9% and a consistent retention ratio of 85%, though we did experience a cutback on one of our cessions during the April renewals, which impacted our total retention results. We continue to add favorable new business to our portfolio, reflecting our repositioning of AXIS Re into a more targeted, consistently profitable, and less volatile specialist reinsurance provider. Looking at our consolidated business, we are encouraged by our progress and capability to serve clients in important specialty markets, evidenced by our strengthening leadership position in wholesale and the Lloyd's market. Our global practice capabilities in areas like cyber, marine, credit and political risk, and renewable energy continue to grow. We are also enhancing the service and value delivered to our customers through investments in digital tools, data analytics, and expanding our presence in lower and middle market segments. Furthermore, we remain committed to our expense efficiency initiatives. Our human capital strategy is central to our overall approach. We continue to attract fresh talent and retain our top performers. As Albert noted earlier, we are gaining recognition as a leading employer with a strong culture and environment. We still have much to accomplish to reach our full ambitions. The current market conditions, the breadth of our product capabilities, the strength of our distribution relationships, and the quality of our talent give me confidence in our ability to meet our goals for brokers, customers, and shareholders. With that, I will hand it over to Pete to discuss the financial results in more detail.

Thank you, Vince, and good morning, everyone. This was a strong quarter for AXIS. During the quarter, we generated net income available to common shareholders of $173 million and an annualized return on equity of 16.2%. Operating income reached $200 million, our best performance since 2012, and our annualized operating return on equity was 18.8%. Diluted book value per share increased by $3.36, or 7.2%, to $50.31, largely due to net unrealized gains, other comprehensive income, and net income during the period, somewhat offset by dividends declared. As mentioned in our press release, when adjusted for net unrealized losses on available-for-sale fixed maturities, the book value per diluted common share would be $56.64. The company achieved a combined ratio of 91%, down 0.5 points from the same quarter last year. This quarter's pretax catastrophe and weather-related losses, after reinsurance, were $38 million, or 3.1 points, primarily due to the floods in New Zealand, Cyclone Gabrielle, and other weather-related events. This compares to $60 million, or 4.7 points, in 2022, which included $30 million, or 2.3 points, due to the Russia-Ukraine war. Despite the higher-than-average natural catastrophe activity in the industry this quarter, we maintained our strong focus on reducing volatility. The insurance segment performed very well, and it's worth noting that the 3-point catastrophe loss ratio did not receive any benefit from the property aggregate cover that was still in place this quarter. Additionally, of the $13 million in natural catastrophe losses reported this quarter, less than $1 million is linked to ongoing specialty lines. Net favorable prior-year development was $4 million this quarter, compared to $9 million in the first quarter of 2022. The consolidated acquisition cost ratio was 18.7% this quarter, down 1 point from the prior-year quarter, driven by decreases in both segments. The consolidated general and administrative expense ratio of 13.6% was consistent with the previous year. Finally, on a consolidated level, fee income from strategic capital partners was $8 million, down from $18 million in the prior-year quarter, as we no longer see reinsurance catastrophe business to third-party capital partners. Now, moving on to our segments, I'll begin with insurance, which had another strong quarter with good performance across several metrics. Gross premiums written grew by 7% to a record $1.4 billion this quarter. I won’t delve into the details on premiums for insurance since Vince covered that in our first quarter discussion. I will emphasize that we continue to grow in our most desirable markets. The current accident year loss ratio, excluding catastrophe and weather events, increased by 1.7 points compared to the first quarter of 2022. As mentioned in our third-quarter call, we raised our loss ratios in liability to reflect increased loss trends. Therefore, our current quarter loss ratios align with what we booked in the latter half of last year. The acquisition cost ratio fell by 0.4 points in the first quarter, primarily due to a reduction in variable acquisition costs linked to property. The underwriting-related general and administrative expense ratio decreased by 1 point in the first quarter, mainly due to a rise in net premiums earned. Now let’s turn to the reinsurance segment. Gross written premiums in the reinsurance segment decreased by $341 million, or 26%, compared to the prior-year quarter. It may be helpful to clarify the information shared during our fourth-quarter investor call regarding access to desired business after exiting catastrophe and property reinsurance. We were unable to renew the catastrophe, property, and engineering business we exited, which accounted for about $200 million this quarter. Additionally, we exited reinsurance aviation on January 1, which represented close to $10 million in non-renewed premium. Furthermore, we lost about $80 million from multiline business tied to the property book, often referred to as bouquet business, which was primarily centered in the liability book and was not available for renewal. We anticipate losing approximately $30 million in premium from this bouquet business over the remainder of this year. As mentioned in the last investor call, we also expected to lose $10 million in desired renewals due to our exit from catastrophe and property reinsurance. Adjustments related to foreign exchange and premiums impacted the quarter by roughly $60 million year-over-year. As we continue to refine the AXIS Re portfolio, gross written premiums have stayed nearly flat year-over-year, with any increases due to rates and new business aligned with our current appetite offset by non-renewed business that doesn’t benefit our overall portfolio. Overall, in our specialist reinsurance book, we remain dedicated to prioritizing margin over top-line growth in order to build a strong, more stable, and profitable portfolio for the future. The current accident year loss ratio, excluding catastrophes and weather events, rose by 3.3 points, entirely due to our exit from catastrophe and property lines of business. Excluding these exited lines, the ongoing specialty lines, excluding catastrophes and weather, experienced a loss ratio decrease of nearly 2 points, driven by improved loss experience in marine and aviation sectors and an increase in credit surety business in the portfolio, which generally has a lower loss ratio. The acquisition cost ratio declined by 1.6 points, mainly due to the influence of retrocessional contracts and adjustments linked to loss-sensitive features, particularly in motor lines where we faced some negative development but managed to recover some losses by reducing acquisition costs. These decreases were somewhat offset by changes in business mix attributable to the exit from catastrophe and property lines of business. The underwriting-related general and administrative expense ratio fell by 0.3 points, mainly due to reduced personnel costs connected to the exit from catastrophe and property lines, partly counterbalanced by decreases in net premiums earned and fees associated with arrangements with strategic capital partners. Net investment income was $134 million this quarter, compared to $91 million in the first quarter of 2022. During the quarter, investment income from fixed maturities reached $118 million, an increase of over 82% from $65 million in the first quarter last year, driven by an increase in the yield on the portfolio from 2.1% to 3.7% over the past year. At the end of the quarter, the fixed income portfolio had a book yield of 3.7% and a duration of 3 years, while our market yield was 5.4%, significantly higher than the book yield by 170 basis points. In line with my comments from last quarter, given the duration of our portfolio and the current market yields, we expect net investment income from fixed maturities to exceed $150 million in 2023 compared to what we reported in 2022. I'd like to address our investment strategy in light of recent economic and market developments. We continue to adhere to a conservative investment approach, with 85% of our portfolio in investment-grade fixed income and cash, boasting an average rating of AA-. Among this high-quality portfolio, approximately 6%, or $924 million, consists of commercial mortgage-backed securities, with 93% rated AAA and above, while the rest is primarily AA-rated. This maintains a very high-quality portfolio that has performed well. We are confident about our position within the capital stack. Further details can be found on Page 17 of our financial supplement. Our overall exposure to banks stands at 7%, with three-quarters of that relating to global systemically important banks. Additionally, we have less than 1% exposure to regional banks, which are of high quality and generally large and diversified. Currently, we do not own any contingent convertibles. Regarding our bond portfolio, our total direct exposure to first-lien commercial real estate is $624 million, or about 4% of cash and invested assets. This portfolio includes 40% office space, with the remainder comprising industrial, multifamily, retail, and other types of properties. These loans were conservatively originated, with well-placed properties and loan-to-value ratios typically below 60%, and they are performing well. While the current environment is challenging, given the quality of the properties and our position in the capital structure, we believe the portfolio will continue to perform effectively. Lastly, in our alternative investment portfolio, we have roughly $300 million, or 2% of our cash and invested assets, allocated to a diversely managed collection of real estate debt and equity funds, with industrial warehouses comprising over one-third of the holdings, alongside significant exposure in multifamily, life science buildings, and hotels. About 20% of the exposure is to office buildings, most of which were acquired after the onset of COVID. The fund managers have solid track records, and we assess valuations quarterly based on NAV from our managers. In summary, we are pleased with the risk management surrounding our real estate assets and the overall quality of our portfolio. That concludes our first-quarter results. Miranda, I'll return it to you.

Thank you, Pete. We're now ready to begin the question-and-answer section. Chad, over to you.

And the first question will be from Matt Carletti from JMP.

Pete, thank you for the clarification regarding the $10 million commentary on the reinsurance top line from last quarter's call and how it relates to this quarter's results. I want to confirm my understanding. You mentioned that there was $10 million of business that you wanted but ultimately lost. Additionally, there's another $80 million that you considered unavailable due to the exit from the property catastrophe lines, which wasn't presented alongside the $10 million you discussed a few months ago.

Yes, I think that's one way to look at it, Matt. When we consider that $80 million, because it's packaged product and multiline, and given our exit from property, those amounts were not accessible for renewal at all. That figure comes to about $80 million, roughly $60 million in North America and $20 million from Europe.

If it wasn't for the exit from reinsurance or kind of the structure of how they're distributed and the relationships, am I right in thinking that, that otherwise largely would have been business that you would have liked to retain?

We evaluated the liability aspect based on the relevant terms, though not the property itself. We did explore it and, concerning our appetite for multi-line products, we were unable to engage due to the property element. However, we had a few clients that arranged separate treaties, allowing us to address the liability part, which we were pleased about. In addressing whether exiting property and property cat harmed our franchise, we tracked the volume of business we quoted and aimed for, but in the end, were informed that it would not be granted to us. We noted a $10 million impact in Q1, and Vince mentioned that we likely lost around $30 million on April 1. So, for all the business available to us, there were some we couldn't pursue because of the property factor, as Pete pointed out. This included the property and property cat offerings. Regarding the rest, we chose not to renew certain business because it didn’t align with our portfolio or return expectations. Additionally, we submitted bids for both renewal and new business, but to this point, we've identified about $40 million that we wanted but was not awarded to us.

Okay. That's helpful. And then one other, if I could. On the specialty reinsurance, the ongoing reinsurance, it looks like there was $35 million of adverse development kind of professional lines and liability lines. And my question is, could you peel back the onion there a little bit? And what I'm trying to get at is, was this more of an issue where you see what's going on in the environment, in the industry at a high level, inflation and so on and so forth, courts reopening and trying to take some proactive steps to get ahead of something? Or are you seeing something come through in your claims data already that you are reacting to?

Thanks, Matt. This is Pete. I'll take that. In the quarter, we noted approximately $33 million in liability for reinsurance, and around $18 million in motor. We proactively conducted a thorough review across all our lines of business to evaluate the potential effects of rising financial inflation, which is separate from social inflation. This was a response to the economic conditions we've observed over the past year. Overall, we strengthened our positions across all lines, effectively managing the situation. However, regarding the reinsurance liability and motor specifically, both have long-term cash flow implications, so the increase in our financial inflation outlook impacted these areas significantly. The rise in the motor book can be attributed entirely to our projected financial inflation. On a positive note, we managed to recover about half of the effects in the motor area due to loss-sensitive features of that book. For the liability book, about one-third of the $33 million is linked to the adjustment of our financial inflation expectations. The remaining two-thirds relate to two other factors we mentioned previously. Firstly, we experienced pressure in pre-2019 pro-rata contracts from some seeds, prompting us to increase that figure by about one-third. Secondly, there was a significant claim from 2021, and rather than simply absorbing an Incurred But Not Reported (IBNR) estimate, we chose to take a negative Prior Year Development related to that claim. Does that help clarify?

Very much so. Yes. Pete. Appreciate it. Great. And Albert, I think it's the last quarter we have you. So I just want to say, wishing you a wonderful retirement and best of luck.

Thanks very much, Matt.

Let me extend my congratulations to you, Albert, and I wish you a fulfilling retirement. My first question is a follow-up regarding the loss trend and the higher loss picks in insurance. In the course of 2022, you mentioned a potential reset of picks for the program's business. Is this what you're currently observing in the first quarter of 2023, or is the increase unrelated to that?

No. What I would say, Yaron, this is Pete. I'll jump in here. We made those increases in the third quarter last year. So what we're noticing in the first quarter of this year reflects the fact that we've raised them since the first quarter of last year. However, where we stand with that book and the rest of our casualty book aligns consistently with our position in the second half of the year. One point I want to highlight from the fourth quarter is that we had a very strong period with our short tail lines, which somewhat overshadowed the increases we made to those loss picks in the third quarter. This consistency in our recent performance is nothing new, and I want to reaffirm that it will remain in line with what we've observed in the last few quarters.

Okay. And my second question, I think in the prepared comments, you said that you did grow in the marine book in insurance. At the same time, you exited marine and reinsurance. Can you maybe talk about what makes the insurance side more attractive and more interesting for the company to still participate in versus reinsurance?

This really points to our language around emphasizing the underwriting business that is more aligned to the outlook of our product mix and profit aspiration between the two businesses. The positioning of our insurance book aligns more attractively to our portfolio construct aspiration. And so we are leaning more heavily into the insurance marine portfolio from a size and breadth of appetite, but have a very select and non-conflicting appetite within our reinsurance book.

If I can just add to that. Bottom line, we've got leadership positions on the insurance side in the specialty lines, including marine. And we can really build a moat around those leadership positions and grow on them, whereas we were just a small player in reinsurance. So if you have to choose what market you're going to be in, you'd rather be in the market where you're a leader with preferred access to risk than just one of many.

Looking ahead to the next couple of quarters and considering the issue of linking property reinsurance to other lines, how should we assess the impact this will have on your underwritings in the second and third quarters?

Well, I know overall, I did mention that we do have about $30 million of that multiline business still to renew the rest of the year, Josh, and that will not be available to us to renew. I think probably about 1/3 of that is going to be in the second quarter and 2/3 of that will be in the third quarter. So that will impact beyond the loss of not renewing any of the property business in the next two quarters.

Okay. And you think that that's the total amount that we should be concerned about and not any more than that?

This is Vince. I believe there could be additional impacts. However, so far, through the April renewals, we've discussed and Albert provided context regarding the amount, which is $40 million from what we have already booked. The final outcome will depend on how attractive the pricing is and the suitability of the terms we agree upon. That reflects our current situation.

Yes, I think that was in...

Yes. The 63% loss ratio in reinsurance for the first quarter was quite favorable, particularly considering the low loss ratio aspect of cat-related business. Can you provide some insight into the expected loss ratios for the third and fourth quarters as well as the first quarter, in comparison to the previous periods? You don’t need to provide specific guidance, but given the 60% underlying loss ratio in 2021 prior to implementing changes, how much of that was influenced by the low loss ratio in cat-like lines?

Yes, this is Pete. I mentioned this during the fourth quarter call, and I'll reiterate it now. When we assess the reinsurance segment excluding property or property catastrophe, I believe it should be around a mid-60s loss ratio, and I expect it to trend that way. This quarter showed positive results for that line of business. My recollection is that you noted a loss ratio of 63, while I think it was actually 65.

That's right, right. And the 65 on the back half of '22.

Yes. Yes. So I mean we're going to continue to provide those pages at the back end of the financial supplement for you guys to be able to reconcile this. But I felt it was going to be in mid-60s. And in this quarter, it was at 65.2. Again, we have been getting some rate and trend in that particular book, and we had some good credit surety results in this quarter, but there was nothing special. I do think it should be a mid-60s type of portfolio, Josh.

And then one quick one, given that obviously, you have like property claims payments going out the door, when should we think that probably the paid-to-incurred ratio in the reinsurance business can get back below 100%?

That's a hard one to call, Josh, because now you're asking me to actually make a call on when the claim settlement dates and all these things will be done. So I actually don't want to speculate on that one. But as I said last time, it's going to be a while before it gets below 100% because the net earned premiums come down so dramatically.

My first question is within insurance. So the 52.2 underlying loss ratio, I appreciate, right, that you guys said it was similar to the picks that you raised in the back half of last year. So is that where you would expect the underlying loss ratio and insurance to trend over the balance of the year?

Yes. Elyse, this is Pete. I've consistently said a low 50s ex-cat loss ratio is where I expect the insurance group to be, and I'm not coming off that expectation right now.

And then sticking with insurance, right, Vince, you said that rate increases are ahead of loss costs at around 9%. Where would you peg loss costs in your insurance business right now?

Around 8%.

Yes, we continue to see it in the high single digits, so Elyse, depending upon the line...

And then within reinsurance, right, so you guys gave some good color, right, on the adverse development within the specialty line. Did that have any impact on how you were booking the current accident year?

It didn't affect the current accident year because all those expectations for higher inflation were already built into our pricing expectations. And so they were already built into our expected loss ratios in the book, Elyse.

Just a couple of quick questions. Did you see any D&O losses in the quarter that kind of impacted your core loss ratio?

So Derek, if your comment is about anything that we adjusted the current accident quarter loss ratio associated with D&O, there wasn't anything special that we did to change our thinking on the underlying loss pick in our professional lines business this quarter.

Got it. Okay. And then my second question is just on the insurance rate increases, it looks like it accelerated to 9% from 6% last quarter. Can you just talk about some of the lines of business that drove that? And then kind of your expectation for throughout the year?

Yes. I think that there was a good correlation between the gross rate change of 9% that aligned to the books of business that we felt we could push rate. We have seen it evidenced, obviously, in property; we saw it evidenced in terrorism. We continue to see though moderating in cyber. Those were core lines, certainly property had some rate change as well that was important and certainly marine more. So that's a good color on the classes and the order of magnitude.

The next question is from Brian Meredith from UBS.

A couple of them here. Just quickly, Vince, with the headwind still from the remainder of the year, I guess, particularly the second quarter from some of the transactional business that you maybe had last year or this year, I'm just trying to get a sense of where that professional lines declined to 27%. How is that going to progress through the remainder of the year?

Brian, the 22-odd percent decrease certainly was, as you say, impacted by the absence of transactional liability, which was really about $40-odd million. And so we're obviously being observant to our other product capabilities across our global professional lines abilities. And as those marketplace opportunities open, be it in transactional liabilities or other subsegments, we'll continue to pursue those opportunities aggressively. In terms of the projected growth, it's too hard to speculate, obviously, as to whether the TL market opens in normal course. We think it's down minimally on 25%, 30-odd percent. But we have a lot of other product arsenal. And as you know, last year, we introduced a dedicated team to our wholesale division from the financial lines group. We've recently added cyber and NPL capabilities to that division. So we have a number of offsets that we're putting into our pipeline, but that's where I would leave it at the moment.

Great. That's helpful. Second question, Pete, I'm just curious, on the insurance underlying loss ratio here. I appreciate given the trend in where you've got the number. But if I take a look at the mix of business in your insurance, it appears that the mix is shifting more towards what do we consider lower underlying loss ratio kind of business, i.e., property, cyber. Is that something that we could see an impact here going through the year?

That's a potential, especially with the positivity we have on the property market right now, Brian. However, I would point out we are managing our P&Ls. So our property appetite even in insurance will be somewhat guided by our PML appetite, and we still see real opportunity in the E&S casualty space. But definitely, the drop in pro lines kind of did a little bit of a swing this quarter. So that is something that you can think about as you're thinking about your model the rest of the year. But that is appropriate.

Great. And then last question, just curious on capital management. I just want a quick question here. If I look at your debt-to-capital ratios, they're coming down, obviously, as the portfolio comes back here. And given that the volatility of your business should be clearly going down pretty meaningfully this year, why wouldn't you kind of step up and maybe buy back some stock kind of until the market that we're confident in our lower PMLs, lower volatility? What's going on here go forward in our kind of business profile.

Yes, Brian, that's an excellent point. I think my response will remain that we plan to be opportunistic about it. However, given the progress we are making, it's certainly something we will consider more as we move ahead. We have an open authorization, and we will remain flexible. This is primarily based on the growth we anticipate from the insurance side, which is our top priority for capital usage right now due to the appeal of the markets. Additionally, I believe our shares are currently very attractive, and I agree with you on that.

Thanks so much.

Thanks, Brian.

And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Albert Benchimol for any closing remarks.

Thank you, Chad, and thank you all for joining us. As mentioned earlier, this will be my last investor call as CEO of AXIS. It has been a tremendous privilege to serve in this role, and I want to express my gratitude to our investors for your trust and support, to our customers for your partnership and friendship, and to my AXIS colleagues for your hard work and dedication in bringing the company to its current standing. I appreciate the strong relationships we've built over my 13 years at AXIS and wish you all the best in the future. Thank you once again. Chad, that concludes our call. Thank you.

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.