AXIS Capital Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 1, 2024

There are 9 speakers on the call.

Operator

Hello, and welcome to the 4th Quarter 2023 AXIS Capital Earnings Call and Webcast. All participants will be in listen only mode. I would now like to hand the call to Cliff Gallant, Investor Relations. Please go ahead.

Speaker 1

Thank you. Good morning, everyone, and welcome to our conference call to discuss the financial results of AXIS Capital for the Q4 year ended December 31, 2023. I'm Cliff Gallant, Investor Relations at AXIS. Our earnings press release and financial supplement were issued last night. If you'd like copies, please visit the Investor Information of our website at axiscapital.com.

Speaker 1

We set aside an hour for today's call, which is also available as an audio webcast on our website. Before we begin, I'd like to invite you all to attend our Investor Day, which is being held the morning of May 30 in New York City. Joining me on today's call are Vince Tizzio, our President and CEO and Pete Vo, our CFO. In addition, I would like to remind everyone that the statements made during the call, 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 ks 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 statements.

Speaker 1

In addition, non GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial And with that, I'll turn the call over to Vince.

Speaker 2

Thank you, Cliff. Good morning and thank you for joining us. 2023 was a transformative year for our company. In recent calls, we've spoken to our aspiration to elevate AXIS As a specialty underwriting leader and our year end results signal that we've taken important steps toward this ambition. Looking at the year as a whole, We advanced our targeted underwriting strategy, further developed a diversified and resilient portfolio and strengthened our operating model to meet our financial objectives.

Speaker 2

Let's discuss some of the headline numbers for the year, which are inclusive of the reserve strengthening that we announced last week. In 2023, We generated operating income of $486,000,000 return on average common equity of 7.9 percent and operating return on equity of 11%. Excluding the reserving strengthening, our return on average common equity and operating return on equity were 15.4% and 18.5%, respectively. We achieved record performance in several areas, including our premium production, which was the highest in our company's history at $8,400,000,000 and our net investment income was 6 $12,000,000 Further, we produced 15% year over year growth in diluted book value per share and delivered a current accident year combined ratio of 91.8%, a more than 4 point year over year improvement. These results combined with the strength of our balance sheet and our capital position are very encouraging.

Speaker 2

To deliver on our ambition and meet our financial commitments, we will continue to relentlessly execute against our strategy. I'd like to briefly highlight 3 core elements. 1st, we continue to operate in attractive and are making decisive choices on where to compete, allocate our capital while tapping new sources of revenue. AXIS is a specialty underwriter that brings tailored solutions to its targeted markets and distribution channels to deliver consistent earnings generation. We continue to lean into our insurance book, which as of the year end makes up close to 75% of our gross premiums written.

Speaker 2

In 2023, Our insurance business generated record production every quarter and a calendar year combined ratio of 92.5 On a current accident year basis, that's 87.4%. Insurance premiums were up 17% Year over year, excluding professional lines, and as we've discussed over the past several quarters, this is a class that we have been reducing, Given the pricing environment, particularly in public D and O, we remain well positioned to capitalize on favorable conditions in growing market segments. For instance, AXIS is one of the leading players in the U. S. Wholesale marketplace, contributing 5 consecutive years a double digit growth while yielding a 76 current accident year combined ratio in 2023.

Speaker 2

We're a global leader in renewable energy where we see opportunity for further profitable growth as the world transitions to cleaner energy forms. Indeed, we've committed ourselves to the energy resilience and transition space through of the first ever Lloyd's syndicate to exclusively underwrite these risks. We're acting with agility and capitalizing on smart growth opportunities, including adjacent markets where we have not previously played. By example, in the latter part of 2023, Within North America, we launched an inland marine unit. Within weeks, they were actively quoting and writing new business.

Speaker 2

Also, In the past year, we've made strides in scaling our dedicated wholesale lower middle market unit, generating 48% growth Year over year, in London, where we're recognized by Lloyd's as a top 10 leader and outperforming syndicate, We're leveraging our global platform to introduce our London specialty products to North America. This includes launching to date US Marine Cargo and Construction, and we'll continue to make more investments and product launches. As respects our reinsurance business, We have effectively reshaped Access Re as a targeted specialist reinsurer focused on delivering more consistent profitability and reduced volatility. In 2023, we produced a current accident year combined ratio of 93, a 6 point improvement year over year. Our momentum was sustained at the oneone renewals, where 45% of our business for the year is up for renewal.

Speaker 2

During the 1 ones, we produced low double digit growth in our targeted specialist premium adequate lines. 2nd, we are investing in building best in class capabilities in underwriting, claims and operations. In 2023, we made clear progress across a number of fronts. Our loss ratio for accident year 2023 was 58.6, which is 4 70 basis points better than accident year 2022. As respects people, we've attracted strong talent to complement our existing team.

Speaker 2

By example, this includes additions to our underwriting associates in North America and London. And within our claims organization, we've deepened our bench, both in the number of teammates and expansion of our skill sets, particularly in liability lines. In both claims and operations, we have repositioned the operating models to more closely align with our underwriting and business priorities while improving efficiencies. Claims, we're growing our data and analytic capabilities to bring insights to our underwriters to help them make continued informed risk selection. Within operations, we're investing in digital and automation to increase our speed of submission intake, And we're continuing to enhance our technology platform with a priority of driving transactional efficiency.

Speaker 2

In addition, artificial intelligence is an area that we're investing in with a focus of harnessing its power to augment our company's overall effectiveness. 3rd, we are improving how we operate to become a more integrated and efficient company. Our How We Work program is at the core of this effort. We are implementing operating model improvements focused on enhancing organizational efficiency, Making investments that empower our colleagues and optimize their effectiveness while improving service quality, accelerating growth and ensuring more consistent profitable returns are delivered. Our progress will be evidenced by our sustained underwriting results and an improving expense ratio contemplated with engaged associates that are collectively focused on achieving our financial objectives.

Speaker 2

Ultimately, it is our expectation that Access will deliver a consistent low 90s combined ratio an expense ratio in the low 30s, double digit ROE and book value per share growth. Finally, Just a few words on impressions for the 2024 operating year. We entered the year with confidence and momentum, and we believe we are well positioned to take advantage of generally favorable markets. As I've noted, we have a number of investments that are underway, investments in our people, our operating capabilities and our suite of specialty products, and we're progressing our How We Work program To enable the advancement of our ambitions, in sum, we're supported by a team that's focused and excited to continue bringing value to our brokers, our customers and stakeholders, and we're united in the pursuit of our strategic objectives. I'll now pass the floor to Pete, who will detail our Q4 and full year 2023 results.

Speaker 3

Thank you, Vince, and good morning, everyone. As you heard from Vince and saw in our pre release last week, AXIS had a very strong performance in 2023. Inclusive of the reserve actions, our operating income for the year $486,000,000 or $5.65 per diluted common share, which together with net unrealized gains drove diluted book value per share to $54.06@yearend, growth of 15.1% over the prior year. In underwriting, key highlights from the year include on a consolidated basis, our current accident year loss ratio ex cat and weather of 55.9 percent is similar to the prior year. Importantly, our 2023 loss picks were consistent with the learnings from our recent in-depth reserve review and did recognize higher loss trends in liability lines.

Speaker 3

2023 pre tax cat and weather related losses net of reinsurance totaled $138,000,000 or 2.7 points. We would highlight that for the industry, 2023 was another active natural cat year with annual estimates ranging from 95,000,000,000 over $100,000,000,000 Importantly, at AXIS, our market share of these industry losses was the lowest they've been in over 10 years. Our performance in 2023 was excellent and we would expect a typical natural catastrophe load to be in the 4 to 5 point range. 2023 consolidated acquisition cost ratio was 19.7% and consolidated G and A expense ratio of 13.5% We're consistent to the prior year. As Vince said, as we execute on how we work, we're confident that we will see lower expenses in 2024.

Speaker 3

And on a consolidated basis, fee income from Strategic Capital Partners was $53,000,000 for the year. This is very similar to what we saw in 2022, but with a change in mix as our property and catastrophe vehicles wound down And we launched a new vehicle Monarch Point Re. We expect quarterly fees from Strategic Capital Partners to be in the low to mid teens on a go forward basis. Now let's move on and discuss our segment results in more detail. Insurance had a strong underlying year and 4th quarter.

Speaker 3

Gross premiums written were $1,600,000,000 for the quarter $6,100,000,000 for the year, an increase of 10% compared to the prior year. Reviewing the quarter, we grew gross premiums written by 8%. Our growth was across all our lines of business with the exception of professional lines, where we continue to be cautious on public D and O. Excluding professional, we grew 14% in the quarter 17% for the year. Overall, we're growing where we want to in our chosen lines and markets.

Speaker 3

The portfolio mix we have at the end of the year is purposeful and attractive. In the Q4, our short tail business lines represented 56% of our portfolio and these lines are highly price adequate and still achieving rate well in excess of trend. We continue to experience price discipline in these lines, especially in the property lines, which saw double digit rate increases of 15% in the quarter and in credit and political risk and A and H with both achieving mid single digit rate increases, which at least equal underlying loss cost trends. In our long tail lines, we remain cautious on public market D and O, where we have cut our book in half from a year ago and which again saw a double digit rate decreases of approximately 22% in the quarter. In liability lines, we achieved rate in excess of trend with rates up 10.5% in the quarter and we continue to emphasize the need for strong rate increases in this line in order to keep pace with loss trends.

Speaker 3

Lastly, while cyber remains well priced, the rate change leveled off in the second half of twenty twenty three after significant increases in the previous few years. And in the 4th quarter, rates were down slightly at minus 1.7 points. In cyber, we continue to see better opportunities in the large client market and have continued to deemphasize the small commercial market. Overall, the insurance book has strong price adequacy as we enter 2024. The insurance combined ratio for 2023 was 92.5 percent including 5.1 points of net adverse reserve development and 3.2% of cat and weather related losses.

Speaker 3

For the quarter, it was 106.7%, including the 19.8 points of reserve strengthening. The full year current accident year loss ratio ex cat and weather was 51.8, which compares to 51% in the prior year. As we've discussed on prior calls, we have a few moving pieces here. We have recognized the higher loss trends in liability lines and somewhat offsetting this, we have a change in business mix in favor of shorter tail lines like property and marine, which carry a lower attritional loss ratio. For the quarter, the insurance year loss ratio was 52%, in line with where we've been for the rest of 2023, although up from a very strong 49.3% in the Q4 of 20 The acquisition cost ratio of 18.7% for the year, up slightly from the prior year.

Speaker 3

The increase is principally driven by lower ceding commissions of a point on our quota share treaties that renewed during 2023. Similarly, the ratio was 19.1 in the 4th quarter, up from the prior year's quarter of 18.6. The underwriting related G and A expense ratio was 13.6% for the year, down from 14.2% in 2022, driven by increased net earned premiums. This also drove the 4th quarter improvement to 13.3 from 13.7 in the year ago quarter. Now let's move on to the Reinsurance segment.

Speaker 3

I'll remind everyone that the 4th quarter is the smallest quarter for gross premiums written for Reinsurance, representing under 10% of the segment's full year gross premiums written. GWP for the quarter was down substantially from the prior year quarter, but largely due to much lower premium adjustments and timing benefits associated with a few renewals in the Q4 of 2022. In 2023, we repositioned our reinsurance portfolio And at year end, we're proud of the work that we've accomplished. On a gross basis, reinsurance is now a $2,200,000,000 portfolio of attractively priced specialty reinsurance business. In 2023, we saw favorable pricing that is above trend in most lines of business.

Speaker 3

Reinsurance combined ratio for the year was 107.6, which includes 14.6 points of net reserve strengthening And for the quarter was 162.8, which includes 69.8 points of reserve strengthening. The 2023 current accident year loss ratio ex cat weather was 64.8, up from 62.6 in the prior year. As we indicated, as the catastrophe and property premiums ran off, the book has transitioned to a more consistent and profitable book with a higher attritional loss ratio offset by a significant drop in the catastrophe loss ratio, which has resulted in a lower and less volatile Current accident year net loss ratio. For the quarter, the current accident year loss ratio ex cat and weather was 64.5 compared to 65.5 a year ago. On expenses, the full year total expense ratio was 26.6, down from 27.2, largely reflecting the change in business mix on the acquisition ratio and 4 tenths of a point decrease in the G and A ratio as we have created a more efficient organization.

Speaker 3

Similarly for the quarter, the expense ratio was 27.7 compared to 28.4 in the prior year quarter. Moving on to investments. We had a great year for net investment income. For the year, we had $612,000,000 of net investment income, up from the prior year. I would note that the particularly strong 4th quarter result of $187,000,000 was driven by returns on fixed income of $142,000,000 and a very good quarter for alternatives, which produced $25,000,000 of net investment income.

Speaker 3

Due to timing of gains from alternatives, would not consider this quarter to be a normal run rate for that asset class. As we look to 2024, The overall outlook is positive as our average yield on fixed income securities was 4.2% at year end and The new money yield is 5.4% and we continue to generate strong cash flow. Our capital position is strengthened during the year from improved underwriting, solid investment performance and management actions taken. As you've all seen, S and P recently took us to credit committee to remove Capital Holdings Limited from Negative Credit Watch and reaffirm its issuer credit rating. They also reaffirm the financial strength ratings of our operating entities.

Speaker 3

The credit report highlights the fact that we had redundant capital at the stream stress competence level under their new model at year end 2022. And they forecast that we will remain redundant over the forecast period 2023 through 2025. Further, in the quarter, we returned $38,000,000 to shareholders through common dividends, which brings our total year to date capital return to approximately 100 $53,000,000 As you know, our Board authorized a $100,000,000 share buyback in December. Given the substantial opportunities in our specialty markets, we continue to invest in our people, products and operating infrastructure. We equally see strong value creation ahead for our shareholders.

Speaker 3

So we are currently in the market repurchasing shares. I also wanted to address the government of Bermuda's Income Tax Act and the provision referred to as an economic transition adjustment. We continue to evaluate the implementation of the rules and given the clarifications provided on January 16, we expect to make an assessment in the coming months. In summary, this quarter and throughout the year, we continue to advance our strategic priority to deliver growth in book value. We are committed to building on our progress and are optimistic for the future.

Speaker 3

That summarizes our 4th quarter results. And with that, I'll turn it back to Cliff.

Speaker 1

Thank you. Operator, we're ready to take questions.

Operator

Wonderful. Thank you. We will now begin the question and answer session. Today's first question comes from Josh Shanker with Bank of America. Please go ahead.

Speaker 4

Good morning, everybody. You've probably been busy in the last 24 hours, but you may have seen that a couple of other insurance companies reported reserve charges In the aftermarket yesterday, one of them who tends to be a direct competitor in a lot of things that Access does. In their 10 Q, they said that they took a charge increasing the inflation assumption around all years from 2016 through 2023. I'm wondering when you talk about your reserve charge, What kind of inflation assumptions were changed and how that affected accident years both pre COVID and post COVID?

Speaker 3

Hey, Josh, this is Pete. We'll go back to that. We actually adjusted all of our inflation assumptions as we look back. And again, I would probably encompass social inflation to mean not only what we see for severity trends, but we see what we see for taking a longer development patterns in our underlying. And as we look at that, we've moved all those trends up to where we believe they're going to be, which would be high single digits.

Speaker 4

And so is the 22 PIC higher, now post reserve charge than it was a year ago?

Speaker 3

Just slightly, as I mentioned last week, we did increase our liability reserves in insurance. It was specific to 2 books of business. It was our primary casualty book and some program business. That program business is now in runoff Josh, so that's not affecting the 2023 current accident year. On the primary casualty where that was set for 'twenty two is equal to where it was set for 'twenty three.

Speaker 3

So we believe Both picks are very strong.

Speaker 4

And where do you stand in terms of COVID era, I guess COVID related reserves, have those been completely released at this point or is there still some reserves up for COVID type claims?

Speaker 3

No, we still have some reserves up for COVID type claims, especially in our reinsurance segment, where it's just taking longer to actually understand impact of COVID coming from some of our seats, especially in the European theater. On the insurance side, that's pretty low. That's mostly all paid out by now. And from our original estimate that we put up, I'd say reserves are down to 10% the original estimates were at about 90% paid.

Speaker 4

And if I can sneak one more in, can we take the $425,000,000 and break it Two parts, the gross increases in reserves for inflationary and severity assumptions around social inflation, whatnot and The improvement impact from getting the frequency and the incidence right in the numbers?

Speaker 3

Josh, we look at that in total with all the assumptions and we did not break down the 425 into Those kind of micro pieces like that. So I wouldn't say right now I have those numbers at hand to be able to provide to you. But I would say overall we've actually extended the development patterns in our reserves and we've increased the trend in our reserves.

Speaker 4

Thank you for taking all my questions.

Speaker 3

Thanks, Josh.

Operator

Thank you. The next question is from Yaron Kinar with Jefferies. Please go ahead.

Speaker 5

Thank you. Good morning, everybody. Just want to start with a question on the insurance loss ratio or the underlying loss ratio. So I understand that a year ago you had some one off favorable items. But when I look at the 52% you posted this quarter, it still seems like it crept up a little bit relative to the, I'd say, Q2 and Q3 of this year.

Speaker 5

I'd just like to better understand if there are any loss ratio property lines.

Speaker 3

Yes. Hi, Yaron. This is Pete. Yes, the loss underlying loss ratio, just so we got our numbers right, in insurance was 52 for the quarter. That makes it 51.8 for the entire year 2023.

Speaker 3

There was not anything in the quarter that I would call one off either way. It was a pretty consistent quarter overall. Meat being up by about 2 tenths of a point is really just some noise in the quarter. I would particularly tell you I still think our loss ratio in insurance will be in that low 50s range for the year and actually even for going forward.

Speaker 2

And Pete, over the last 6 or 8 quarters, it's been in this vicinity as well you're on?

Speaker 3

Yes, when I look over the last eight quarters, it's really been in that vicinity. The only mix change would be again increased liability loss picks in 2023 offset by the mix shift into Marine and Property.

Speaker 5

So Maybe just a follow-up on that. I just want to make sure I'm thinking about this correctly. Because ultimately you're saying that we took the loss the trend up, But we're still clearing that trend and then some with the rate we're achieving. We are moving our mix more in the direction of lower attritional loss ratios. So why would the loss ratio that you expect for the coming year or years not improve with that?

Speaker 5

Is it just a matter of conservatism?

Speaker 3

So I'd say as I think about it looking backwards at your own 2022 to 2023, we've got about Our portfolio has moved by about 5 points more towards the short tail lines and that has a lower attritional loss ratio. So what we saw was higher loss picks on the longer tail lines and then with the mix shift that actually offset. So that's why the loss ratio is pretty consistent from 22% to 23% on a full year basis. As we look forward to 2024, what I would tell you is I do expect the loss ratio to be in those low 50s. And right now I'd say the mix we're sorting we actually saw in 2023 is what we're looking for in 2024 also, But that may change based upon market conditions as we enter 2024.

Speaker 3

Okay.

Speaker 5

And then my second question, I think you'd mentioned that you are in the market to repurchase shares here. Can you help us think about the prioritization here of capital towards buybacks, dividends or as opposed to organic growth When it seems like the market dynamic or market environment is still pretty positive for growth, why not lean as much as you can into those organic growth opportunities and maybe set aside buybacks for the time being?

Speaker 3

Thanks for the question, Yaron. What I'd say 1st and foremost is that we feel we're in a very strong capital position. So being in that strong capital position, we equally Really believe we want to grow our business and first priority of capital is to continue to grow into these attractive markets where we see them. But we also equally believe that right now our shares are, I call it, at a value price. And with a $100,000,000 We're out buying some shares back because we think that they are attractively priced for us.

Speaker 3

Overall, we're doing both. And I do think that as we look to 2024, we'll continue to grow in insurance and we have enough capital to do so.

Speaker 2

And Yaron, this is Vince. We've pointed to the specific areas where we're trading in the valuation attached to our organization and the belief we have in further developing value creation and we think it's a good time to do it. Thank you. You're welcome.

Operator

Thank you. The next question comes from Brian Meredith with UBS. Please go ahead.

Speaker 1

Yes, thanks. A couple of

Speaker 6

them here for you. First, I'm just curious, do you expect that the reserve charge you took in some of the higher picks that you're talking about on liability in in recent years to have an impact on your ceded reinsurance program in 2024, could we potentially see acquisition cost ratio actually increasing again in 2024?

Speaker 2

Brian, this is Vince. Over the recent years, the portfolio has been materially reshaped. And so as we go to market in the current period, while we will be prepared for modest changes in our secured reinsurance. We don't expect at this point for it to be material. Just to give you more color and confidence, again, the rate posture since 2019 our liability classes has been well over 50 odd percent.

Speaker 2

The portfolio in its composition of limits, Class, retention has been materially as well changed. And I think the recent results in the accident year point to that confidence.

Speaker 6

Got you. That's helpful. And then I guess My second question, Pete, I think you mentioned that you expect, I guess, total GOE to be down in 24 versus 23. I just want to clarify that. And also on that topic, I noticed corporate overhead was down pretty meaningfully year over year and I know there were some unusual items in the Q4 of 2022, but I was just wondering if that's a good run rate or a little bit low?

Speaker 3

Yes, I would say Brian that you hit the nail on the head there. There were some unusual items in the Q4 of 2022. When we look at where we are in our Corporate, I'd say the 4th quarter is a decent run rate. And I do think as we look forward to 2024 with the actions we've been taking while this year we ended up with a G and A ratio overall for the group for the full year of about mid-13s, I would expect it to go into the 12s as we get through 2024.

Speaker 6

Great. And then Just one last one. I think you mentioned some timing stuff in the reinsurance business that hurt premium. Any way you can kind of quantify what happened?

Speaker 2

It was 2 component parts. There were adjustments and there were renewals that had moved out of the quarter In combination, I think adjustments were about a difference of $39 odd 1,000,000 in the quarter as compared to negative $9,000,000 in the Q4 of 'twenty three. There was also a couple of transactions, 1 in motor and 1 in credit that renewed in a different time period and that in consequence is the shortfall. Having said that, we grew new business, though it's a very Small degree of what comes to market in the Q4, but I think about $7 odd 1,000,000 in the quarter.

Speaker 3

Yes, I think as I look at it, Brian, if I adjust for the premium adjustments where we had a lot last year and the timing and I pull those out, the 2 of them add up actually over $80,000,000 The rest of the book on a, I'll call it, a normalized basis grew at just over 5%.

Speaker 4

Great. Thank

Speaker 2

you.

Operator

Thank you. The next question comes from Elyse Greenspan with Wells Fargo Securities. Please go ahead.

Speaker 7

Hi, thanks. My first question is on the buyback. So I think you guys have $100,000,000 authorization out there. And I know you said you've just started repurchasing your stock. So is the $100,000,000 like what you would expect to buy back this year?

Speaker 7

Or is it that Just going to kind of judge new business opportunities and things like that and then we'll see where the capital return shakes out?

Speaker 3

So Elyse, this is Pete. I'll take that. Yes, our number one priority for capital is profitable growth and we do see real good market opportunities there. Right now we have the $100,000,000 authorization from the Board. We'll use that opportunistically as I've said in the past based upon where we see market opportunities.

Speaker 7

And then I think you guys some of your peers, right, have elected to set up a DTA around Bermuda tax changes. Don't think you guys have done that yet. Do you have a sense of how impactful that could be? Because my understanding, right, is that that would be helpful your capital position, if you did choose to similarly set something up like that?

Speaker 3

So we're going to look at it this quarter, especially after the clarifications we got on January 16, the lease. If we do elect to do something, my expectation is it would be beneficial. We have to let the tax guys go through all their work, but we'll have more to talk about that at the end of the Q1 on the Q1 call.

Speaker 7

And then on insurance, I know it came up earlier, so you guys are from an underlying loss ratio, right, running Just around 52%, slightly below. And it sounds like you guys are Comfortable at that level? So based on your view of pricing and loss trend and then I guess there could be an impact of mix, right, as property perhaps has a greater concentration, where would you within your overall view of 2024, where do you think the underlying loss ratio in insurance shakes out, does it stay within range of that 52?

Speaker 3

At least I'd agree it does stay within that range of 2, like I said, I think it will be in the low 50s. And as we said, we think there's plenty of market opportunity available to us in 2024, but We'll see it as we go through the year and see how the markets evolve.

Operator

Thank you. The next question is from Meyer Shields with KBW. Please go ahead.

Speaker 8

Great, thanks. I've got a number of But one that I'm being urged to ask is whether there's any risk that establishing a DTA in 2024 will taxable in a way that it wasn't in 2023?

Speaker 3

That's a great question, Meyer. I think Right now, what we know, if we set up the DTA and we follow the guidance by the ETA, it should not be. But I do think that as tax evolves through the course of the year, as Bermuda continues to give out clarifications through the rest of the year. And as the OECD kind of sees what Bermuda is doing, we're going to get more clarity as the year progresses.

Speaker 8

Okay. No, that's perfectly fair. I certainly have no clue. When we talk about the reserve strengthening for the 4th quarter, so We talked about a lot in the context of lines of business, but I'm wondering because we're hearing a lot from competitors and there was a strengthening, Specific to construction, I was hoping you could talk through how you evaluated the reserves that for access are construction related?

Speaker 3

Specific to the line of business construction. What I would say, we've only been go ahead.

Speaker 8

No, no, that's what I meant. I guess the industry rather than line of business, but yes.

Speaker 3

Yes, I would say we've only started leaning into construction as a growth out of our Specialty London operation in the last few years. So we don't have dramatically large reserves when I think about that in our property book As I go back to 2019 and prior, so I'd say overall we're very comfortable with our construction reserves, but it's not the same, I'll call it depth of timing as you actually have in some other people.

Speaker 2

And the construction segment, Meyer, fell under the same scrutiny that we outlined in our call a week ago in terms of the process we undertook.

Speaker 8

Okay, perfect. And then one last question, if I So you talked about shifting towards, I guess, larger cyber accounts. Is that because the pricing trends are different? Or is it that the expected profitability is better with similar

Speaker 2

We think that the margin potential is strong. We think that there's Strong opportunity for us internationally in the large cyber segment. And in the Q4, you saw or will see through our supplement a leaning toward the larger segments and consistent with what we've been reporting in prior quarters, shifting away from the smaller sized enterprises where we see it very competitive.

Speaker 8

Okay, perfect. Thank you so much.

Operator

Thank you. This concludes our question and answer session. I would now like to turn the call back to management for closing remarks.

Speaker 2

Thank you, and thank you for joining today's call. We look forward to reporting on our continued progress in future calls, as well as during our upcoming Investor Day in May. I'll take a moment now to extend great appreciation and gratitude to all of my colleagues across the globe who performed exceedingly well this past year. Thank you.

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