Andrew Andersen

Andrew Anderson of Jefferies followed up on the tax discussion, asking about potential offsetting credits from Bermuda tax law changes. He also questioned the sensitivity of the asset-backed finance and credit portfolio to interest rates.

Answer

CFO Alan Declare stated that no offsetting tax credits can be recorded until Bermuda tax law is officially passed. Group Managing Director Johnny Strickle and CEO Dan Burrows addressed the credit portfolio, explaining it is highly diversified and has proven resilient through both the recent interest rate shock and the COVID-19 pandemic, with daily underwriting calls allowing for real-time pricing adjustments.

Andrew Andersen inquired about underlying growth opportunities for the second half of the year, after adjusting for reinstatement premiums and a timing headwind in Aviation. He also asked for the drivers behind the $41 million in favorable prior year reserve development.

Answer

CFO Allan Decleir confirmed a timing shift in an Aviation contract from Q1 to Q2 offset the roughly $80 million in reinstatement premiums. CEO Dan Burrows affirmed the company's confidence in its 10% annual growth target, citing a diversified portfolio and new distribution channels. Regarding reserves, Allan Decleir explained the favorable development was driven by strong performance in the attritional book and releases from prior year catastrophe reserves, and also reflected ongoing derisking from the Russia-Ukraine event.

Andrew Andersen questioned the feasibility of achieving the mid-to-high 80s combined ratio target given recent results and moderating RPIs. He also asked about any seasonality in the company's reserve studies.

Answer

CEO Dan Burrows reaffirmed confidence in the target, noting they would have exceeded it in 2024 excluding the Russia-Ukraine impact. Chief Actuarial Officer Jonny Strickle explained that as a short-tail business, prior year development is driven more by actual claims experience than formal assumption reviews, which typically occur in Q3. He noted favorable 2024 PYD (ex-aviation) was due to a benign claims environment.

Andrew Anderson inquired about the 9% increase in severity, noting it was higher than previous periods, and asked if this change necessitates any adjustments to Root's rates.

Answer

CEO Alex Timm stated that Root is not anticipating major rate changes, as they are broadly rate adequate. He attributed the increase to natural variation, specifically a slight rise in property damage claims, and confirmed it was within the normal range.

Andrew Andersen asked about workers' compensation pricing trends beyond California, inquiring if other geographies were also experiencing price increases. He also sought American Financial Group's intermediate-term outlook for crop premium and pricing, considering the recent decline in corn and soybean prices and potential impacts from changes in global trade policies.

Answer

Carl Lindner, Co-CEO, noted some positive price changes in their strategic comp business, but observed mid-single-digit price declines in the Southeast and Summit business. Regarding crop, Carl Lindner stated that while difficult to predict, futures prices for soybeans likely reflect trade aspects, suggesting stable or increasing premiums. He added that corn futures for 2026 appear stable against current spring discovery prices, but actual spring discovery prices for next year will be established by a 30-day average in Q1.

Andrew Andersen asked about the pricing trends in workers' compensation across different geographies, following a positive tick up, and sought an intermediate-term outlook for crop premium and pricing given changes in global trade policies.

Answer

Co-CEO Carl Lindner noted positive price changes in the strategic workers' compensation business, while the Summit business in the Southeast continued to experience mid-single-digit price declines. Regarding crop, he stated that trade aspects for soybeans are likely reflected in futures prices, suggesting stable or increasing premiums, and corn futures appear stable into 2026. He emphasized that actual spring discovery prices for the next year would not be known until the first quarter.

Andrew Andersen asked for an outlook on crop profitability for 2025, referencing positive commentary from a peer. He also inquired about the pricing environment in specialty workers' compensation and whether the company was seeing different loss experiences in California.

Answer

Co-CEO Carl Lindner III stated it was too early to definitively characterize the crop year but noted that conditions are currently favorable. Regarding workers' comp, he clarified that Florida is their largest state, not California. He highlighted a firming pricing environment, particularly in California, where an 8.7% rate increase was approved, the first in a decade, and noted overall comp pricing declines have moderated significantly.

Andrew Andersen sought commentary on the 2025 crop outlook, asking if it was still too early to call it an average year. He also inquired about the pricing environment in specialty workers' compensation and loss trends in California.

Answer

Co-CEO Carl Lindner III stated it is still too early to formally categorize the crop year's profitability, but noted that current crop conditions are slightly better than last year and commodity prices are in acceptable ranges. Regarding workers' comp, he highlighted a moderating pricing environment with rates down only 1% in Q2. He expressed optimism about California, where the company achieved a 5% rate increase and a market-wide 8.7% increase was approved for September, the first in a decade.

Andrew Andersen asked for an outlook on 2025 crop profitability given positive industry indicators and inquired about the pricing environment in the specialty workers' compensation book, particularly in California.

Answer

Co-CEO Carl Lindner III stated it was too early to definitively label the crop year's profitability, but noted that crop conditions are slightly better than last year and commodity prices are in acceptable ranges. Regarding workers' comp, he highlighted that overall pricing is moderating, down only 1% in Q2. He expressed optimism about California, where the company achieved a 5% rate increase and a larger 8.7% industry-wide increase was approved, signaling a firming market.

Andrew Andersen inquired about the outlook for crop profitability in 2025, referencing positive peer commentary. He also asked about the pricing environment in specialty workers' compensation and loss experience in California.

Answer

Co-CEO Carl Lindner III stated it was too early to definitively call crop profitability but noted that conditions are currently favorable. Regarding workers' comp, he highlighted a moderating price trend, with overall pricing down only 1% in Q2. He was particularly positive about California, which approved its first rate hike in a decade, signaling a potential firming of that market.

Andrew Andersen asked for an outlook on 2025 crop profitability and inquired about the pricing environment in specialty workers' compensation, particularly in California, and whether loss experiences differ there.

Answer

Co-CEO Carl Lindner III responded that it's too early to definitively call the crop year but noted positive indicators like acceptable commodity prices and good moisture levels. For workers' comp, he described a firming market, with overall pricing down only 1% in Q2. He highlighted that California, where AFG has an underwriting loss, recently approved its first rate hike in a decade (8.7%), which is a positive sign for future profitability.

Andrew Andersen asked for clarification on the full-year 2025 EPS guidance, specifically if the $1.20 gain from the Charleston Harbor sale should be considered incremental, and whether the premium growth outlook has changed from the original 5% guide.

Answer

CFO Brian Hertzman confirmed the real estate gain is incremental to the original plan but cautioned against simply adding it to the guidance. He cited pressure from lower-than-expected Q1 alternative investment returns and ongoing market volatility as reasons for not formally updating the full-year outlook. He also stated that while full-year premium growth is still expected to be positive, it will likely be lower than the initial 5% forecast.

Andrew Andersen from Jefferies sought clarification on the 2025 combined ratio guidance of 92.5%, asking if it implies higher loss ratios for workers' comp and casualty, and also inquired about the growth outlook for the Specialty Casualty segment given the strong rate environment.

Answer

CFO Brian Hertzman confirmed the guidance includes a higher loss pick for workers' comp, but this is offset by expected improvements in other social inflation-exposed casualty lines. He stated the primary driver of the higher overall combined ratio is the expense ratio, influenced by business mix and lower ceding commissions. Co-CEO Carl Lindner noted that Specialty Casualty is growing at a high single-digit rate excluding workers' comp, and a potential stabilization in workers' comp pricing could provide a future tailwind.

Andrew Andersen asked for details on adverse development from social inflation lines, the drivers of the underlying loss ratio improvement in the Casualty segment, and whether the company still expects to achieve its initial full-year guidance.

Answer

CFO Brian Hertzman noted that while the Casualty Group's overall results are strong, favorable development from Workers' Comp was offset by adverse development in social inflation-exposed lines across several accident years. He attributed the underlying loss ratio improvement to pricing and underwriting actions in targeted markets. Co-CEO Carl Lindner stated they are not changing their perspective on the full-year business plan, with final results dependent on Q4 catastrophes and crop profitability.

Andrew Andersen asked about the outlook for international organic growth, which has been low single-digit year-to-date, and how the mix of organic growth (specialty vs. retail) might impact underlying margin expansion.

Answer

CFO Douglas K. Howell stated that international businesses are expected to perform similarly next year, with no significant changes. He clarified that specialty businesses, while complex, are not necessarily margin laggards compared to retail, as they often have higher support costs but also strong performance in niche areas.

Andrew Andersen of Jefferies asked for a breakdown of the 5% organic growth in reinsurance, including the impact from pricing and ILS activity. He also requested more details on the company's "early AI successes."

Answer

CFO Douglas K. Howell stated there was minimal benefit from ILS in Q2 and that any pricing headwinds in reinsurance were more than offset by clients purchasing more coverage. Regarding AI, Mr. Howell provided examples such as claim summarization at Gallagher Bassett, policy review, and back-office automation for tasks like bank reconciliations.

Andrew Andersen from Jefferies asked for a breakdown of the 5% organic growth in the reinsurance segment, specifically the impact from pricing and ILS activity. He also requested more details on the "early AI successes" mentioned by management.

Answer

CFO Douglas K. Howell noted that Q2 is not a large quarter for reinsurance and that increased purchasing by carriers more than offset any pricing headwinds. Regarding AI, he mentioned successes in claim summarization at Gallagher Bassett and policy review, but deferred a more detailed discussion until the September Investor Day.

Andrew Andersen asked about the drivers of strong supplemental commissions and requested a breakdown of growth within the specialty business, specifically between open brokerage and MGA, and the potential impact of property rate compression.

Answer

CFO Douglas Howell stated that supplemental commissions benefited from good work negotiating new carrier contracts. J. Gallagher, an executive, added they are largely volume-based. For specialty, Howell noted that the binding business had a terrific quarter with mid-teens growth, while the brokerage business grew around 5-6%, with both continuing to perform well.

Andrew Andersen asked for clarification on higher attritional losses in the casualty and specialty segment, specifically if they were on the specialty side and one-off. He also inquired about the progress of reducing exposure to U.S. general liability and what conditions would lead to a more positive outlook.

Answer

EVP and Chief Underwriting Officer David Marra clarified that higher views of casualty trend have been baked in for about four quarters, indicating no recent change. Regarding general liability, he stated that the company will continue to watch for clients getting rates above trend and investing in claims, with appetite remaining largely stable if these conditions persist. President and CEO Kevin O'Donnell added that this is an optimization to focus on best performers, not a re-underwriting of the entire portfolio.

Andrew Andersen asked for clarification on higher attritional losses in the casualty and specialty segment, specifically if they were on the specialty side and one-off. He also inquired about the progress of reducing exposure to U.S. general liability and what conditions would lead to a more positive outlook.

Answer

EVP and Chief Underwriting Officer David Marra clarified that higher views of casualty trend have been baked in for about four quarters, indicating no recent change. Regarding general liability, he stated that the company will continue to watch for clients getting rates above trend and investing in claims, with appetite remaining largely stable if these conditions persist. President and CEO Kevin O'Donnell added that this is an optimization to focus on best performers, not a re-underwriting of the entire portfolio.

Andrew Andersen of Jefferies asked about the gross premium outlook for the 'Other Property' segment for the rest of the year and questioned why fee income benefits weren't more visible in the acquisition cost ratio.

Answer

EVP & Group Chief Underwriting Officer David Marra explained that they are actively managing the 'Other Property' mix, shifting towards middle-market business to navigate rate pressure in cat E&S, but did not give a specific gross premium outlook. EVP & CFO Robert Qutub clarified that fee income from joint ventures primarily flows through the non-controlling interest line, not as an offset to the acquisition ratio.

Andrew Andersen sought clarification on the Casualty & Specialty combined ratio guidance increase, asking what drove the change if general liability trends were stable. He also asked for the outlook on non-cat bond ILS capital and its potential impact on renewals.

Answer

CFO Bob Qutub explained the Q1 combined ratio was elevated by approximately 9 percentage points from specific large specialty losses (wildfires, aviation, refinery fires) and about 2 points from non-recurring items, prompting the move to a 'high 90s' guide. CEO Kevin O'Donnell stated that he does not expect ILS to materially impact their competitive position, as their Capital Partners business is differentiated and its capital footprint is expected to be stable to growing.

Andrew Andersen asked about Arch Capital's expectations for 1/1 property cat renewals, including anticipated returns on this line and the potential impact of ILS (Insurance-Linked Securities) on industry capital and return levels.

Answer

CEO Nicolas Papadopoulo stated that Arch remains bullish on the cat side, liking the margins. He noted that while the market peaked in July 2024 and saw rate decreases of 5-10% in 2025, the increases from 2021-2024 were substantial (some rates doubled). He expects continued demand in the U.S. and internationally, and despite expected rate pressure, believes margins remain very attractive.

Andrew Andersen asked for Arch's latest view on casualty loss trends and the outlook for mortgage originations into 2026.

Answer

CEO Nicolas Papadopoulo stated that the view on loss trends is unchanged: single-digit for primary and double-digit for excess casualty. CFO & Treasurer François Morin commented that it is too early for a clear view on 2026 mortgage originations, as near-term rates are expected to remain elevated, constraining housing demand.

Andrew Andersen asked about the moving pieces within the income from operating affiliates and whether the full-year 2024 insurance expense ratio is a good baseline for the rest of the year.

Answer

CFO François Morin explained the drop in affiliate income was almost exclusively due to Summers Re's exposure to the California wildfires, and the current quarter is below a normal run rate. He noted the 2024 expense ratio is a 'good place' to start, but they are still hiring for the MCE business while also seeking scale benefits and managing expenses diligently.

Andrew Andersen of Jefferies asked about the rationale for growing in the competitive London specialty market and the drivers behind the premium decline in the 'other specialty' reinsurance line during the quarter.

Answer

Executive Nicolas Alain Papadopoulo expressed bullishness on the London market, explaining that Arch has achieved scale and is a beneficiary of market consolidation, allowing it to 'pick first' in key lines. He attributed the Q4 specialty reinsurance decline to a strategic pullback from cyber quota share business due to less favorable terms and conditions.

Andrew Andersen asked about the pricing environment for casualty reinsurance and the company's go-forward view for growth in that line.

Answer

Jim Williamson, President and CEO, stated that the pricing environment remains favorable, with clients keeping rates in excess of trend, and emphasized disciplined portfolio management and alignment of interests with clients regarding ceding commissions.

Andrew Andersen requested clarification on any movement in casualty reinsurance this quarter and confirmation that reserve studies are complete. He also inquired about the pricing environment and growth outlook for casualty reinsurance, given past reductions in that line.

Answer

Mark Kociancic, EVP and CFO, confirmed that reinsurance reserve studies are complete, noting 'very minor puts and takes' in casualty, primarily from older years and seedings, all U.S. casualty-based. Jim Williamson, President and CEO, stated the casualty reinsurance market remains favorable, with clients maintaining rates in excess of trend. He highlighted Everest's focus on alignment of interest and managing ceding commissions, maintaining current levels of participation.

Andrew Andersen of Jefferies Financial Group inquired about the sustainability of the Insurance segment's ~6% risk margin within its underlying loss ratio and the potential impact of business mix shifts. He also asked about the drivers of the higher expense ratio, specifically regarding the pace and lumpiness of international investments.

Answer

Mark Kociancic, Executive VP & Group CFO, explained that the current risk margin is elevated due to the runoff of an older portfolio and will be data-dependent going forward. He confirmed that a shifting mix toward international and short-tail lines will benefit the loss ratio over time. Regarding expenses, Kociancic acknowledged some lumpiness from international investments and stated that scaling premium to leverage the existing infrastructure is key to improving the ratio.

Andrew Andersen inquired about the growth opportunities in Florida property catastrophe reinsurance at the midyear renewals and the competitive dynamics within specialty lines.

Answer

CEO Jim Williamson stated that the June 1 renewal is expected to be attractive, with Everest potentially growing its book due to increased client demand for more limit. He also noted that while specialty lines are becoming more competitive, expected returns remain excellent across both reinsurance and insurance, particularly in areas like engineering, parametric, marine, and aviation.

Andrew Andersen from Jefferies asked if Kinsale is now rethinking or pursuing new growth opportunities in areas it previously avoided, such as public company D&O or large trucking. He also inquired about the net commission ratio, specifically if it could return to the 12-13% range seen when the business mix was more casualty-tilted, or if it's likely to remain around 11%.

Answer

Michael Kehoe, CEO and Chairman, confirmed Kinsale is always enhancing its product line, citing examples like a bigger push into high-value homeowners, and the establishment of agribusiness, aviation, and ocean marine divisions. Stuart Winston, EVP and Chief Underwriting Officer, clarified that Kinsale is willing to write in certain areas, like small auto fleets, but on its own terms and pricing, not necessarily large trucking schedules. Regarding the net commission ratio, Mr. Kehoe stated that the 10.7% observed in the quarter is the best current guide, reflecting the first full quarter under new reinsurance agreements, acknowledging that a significant change in business mix could cause it to move.

Andrew Andersen asked if Kinsale is now writing in areas it previously avoided 5-7 years ago, such as public company D&O or trucking, and about the potential for the net commission ratio to return to higher levels seen when the business mix was more casualty-tilted.

Answer

Michael Kehoe, CEO and Chairman, and Stuart Winston, EVP and Chief Underwriting Officer, confirmed Kinsale has expanded into new areas like high-value homeowners, agribusiness, aviation, and ocean marine, and is selectively looking at small fleets in commercial auto. Michael Kehoe stated that the current net commission ratio of 10.7% is the best guide, with potential movement based on changes in business mix, but did not project a return to the 12-13% range.

Andrew Andersen asked if the current 8% OpEx ratio is a sustainable run rate, questioned the future direction of the ceding ratio, and sought clarification on whether 'modestly positive' casualty pricing implies more aggressive competition from Kinsale.

Answer

EVP & CFO Bryan Petrucelli confirmed the 8% OpEx ratio is a good run rate. Chairman & CEO Michael Kehoe explained the ceding ratio should trend down slightly due to increased retentions in the new reinsurance program, but the final level depends on business mix. President & COO Brian Haney added that Kinsale's strong casualty experience gives it less need to raise rates compared to the broader industry.

Andrew Andersen requested details on the California wildfire loss, including the gross amount and sources, and asked about the drivers behind the 17% submission growth, specifically its mix and any changes in quote-to-submission ratios.

Answer

CEO Michael Kehoe disclosed the wildfire loss was approximately $45 million gross and $25 million net pretax, stemming from a mix of commercial, inland marine, and personal lines, calling it a manageable result. President and COO Brian Haney confirmed a higher quote-to-submit ratio and noted that while submission growth is volatile, the mix is seeing more personal insurance and fewer, though still growing, shared and layered property submissions.

Andrew Andersen of Jefferies questioned how the underlying loss ratio improved to 55% despite a challenging environment where the 3% rate increase was below the prior quarter's loss trend estimate. He also asked for a breakdown of the improvement between the Property and Casualty books.

Answer

Executive Michael Kehoe attributed the loss ratio improvement to actual loss activity continuing to come in below actuarial assumptions. While not providing a specific breakdown, he confirmed that the Property business has been quite profitable, even with recent catastrophe activity. He also noted that while older construction-related liability years have seen higher loss ratios, these have been addressed with significant pricing and underwriting changes.

Andrew Andersen from Jefferies asked about the drivers behind the casualty underlying loss ratio of approximately 65.5% in the quarter, which was better than the first half of 2025, and if this is a good run rate. He also inquired about the transportation line, noting its growth in late 2024 and subsequent exposure cuts in Q2 and Q3, asking if this represents a re-underwriting or diligent management of the book.

Answer

Todd Bryant, Chief Financial Officer, explained that the improvement in the casualty underlying loss ratio was largely due to a favorable comparison with Q3 last year, which included reserve additions for wheels-based exposures. Jen Klobnak, Chief Operating Officer, clarified that the transportation line's changes are more about diligent management, with significant mid-term cancellations of large accounts due to clients seeking cheaper alternatives. She emphasized constant risk selection and the crucial role of the loss control unit in evaluating account safety.

Andrew Andersen asked about the drivers behind the casualty underlying loss ratio of 65.5% in the quarter, which was better than the first half of 2025, and whether this is a sustainable run rate. He also inquired about the transportation line, noting a shift from growth in late 2024 to cutting exposures in Q2 and Q3 2025, asking about the status of re-underwriting or diligence in this book.

Answer

Todd Bryant, Chief Financial Officer, attributed the improved casualty underlying loss ratio primarily to a comparison with Q3 2024, which included reserve additions for wheels-based coverages. He noted a minor benefit from property coverage in package business this year. Jen Klobnak, Chief Operating Officer, explained that the transportation line's shift is more about diligence, compounded by significant mid-term cancellations of large accounts due to budget pressures and cheaper quotes. She emphasized the continuous focus on risk selection and the critical role of the loss control unit in evaluating account safety and practices.

Andrew Andersen from Jefferies Financial Group asked about the outlook for the construction market and its impact on the surety and casualty segments. He also questioned if the current ex-cat, ex-PYD casualty loss ratio was a reasonable run-rate assumption.

Answer

COO Jen Klobnak described the construction industry as healthy, with RLI's proactive producer outreach driving double-digit submission growth and positive results across its construction-related units. CEO Craig Kliethermes addressed the loss ratio question by reaffirming RLI's conservative reserving philosophy will continue. He stated that while they believe rate increases are exceeding loss trends, they will remain cautious, particularly in wheels-based exposures.

Andrew Andersen from Jefferies asked for an outlook on the construction market and its potential impact on RLI's segments, and also questioned if a flat underlying loss ratio in casualty is a reasonable expectation for the year.

Answer

COO Jen Klobnak described the construction market as healthy, with proactive producer outreach driving double-digit submission growth. President and CEO Craig Kliethermes addressed the loss ratio, confirming RLI will maintain its cautious reserving philosophy, particularly on wheels-based exposures. He stated that while they believe rate increases are exceeding loss trends, they will not change their conservative approach.

Andrew Andersen from Jefferies asked for commentary on the construction market, which impacts about a third of RLI's business, and its potential effect on various segments. He also questioned if the flat underlying casualty loss ratio was a reasonable expectation for the remainder of the year.

Answer

COO Jen Klobnak described the construction industry as 'pretty healthy' and noted that proactive engagement with producers has led to double-digit submission growth in that space. Regarding the casualty loss ratio, CEO Craig Kliethermes affirmed that the company's cautious reserving posture would not change. He stated that while they believe rate increases are exceeding loss trends, they will remain conservative, particularly in wheels-based exposures.

Andrew Andersen of Jefferies asked about the higher ceded premium ratio in the Property segment and whether this new level should be expected for the full year. He also inquired about opportunities within RLI's small commercial segment.

Answer

CFO Todd Bryant clarified that while the Q1 ceded ratio was up, partly due to new event coverages, he expects the full-year ratio to remain within the historical 72%-73% range. COO Jenni Klobnak explained that the small commercial segment targets coverages for professionals like architects and engineers. While opportunities exist, RLI is proceeding cautiously, particularly with auto coverage, by increasing rates and reducing limits due to challenging loss trends.

Andrew Andersen from Jefferies asked about the strategy in the Property segment, specifically the trade-off between maintaining strong margins and pursuing growth amid softening rates. He also questioned if the 10% rate increase in Casualty is keeping pace with higher loss trends and sought guidance on a starting point for the 2025 underlying loss ratio.

Answer

COO Jen Klobnak explained that in the pressured E&S property market, RLI prioritizes retaining renewals and policy terms over chasing new business with aggressive rate cuts. President and CEO Craig Kliethermes added that underwriters avoid deep price cuts that would fall below their benchmarks. On Casualty, Klobnak confirmed that the 15% rate increase on auto coverages is ahead of the 10-11% loss trend. CFO Todd Bryant noted that the 2025 booking rate is still under review but will incorporate current trends.

Andrew Andersen questioned why a 9% casualty rate increase is only considered 'keeping up' with loss trends, asked for an outlook on the 1/1 reinsurance renewals, and inquired about the investment portfolio's potential duration and its floating-rate exposure.

Answer

COO Jen Klobnak clarified that while the 9% rate increase is keeping up with their actual experience, their internal loss trend assumptions incorporate broader, more conservative industry data. On reinsurance, she characterized the market as 'stable' for their 1/1 renewals. An executive explained the investment portfolio duration ticked up to 4.8 years to maintain income durability and that floating-rate exposure is small, around 4% of the fixed-income portfolio.

Andrew Anderson asked about the investment portfolio's domestic yield and any pressure from Argentina. He also questioned the lower corporate expense compared to the first half, asking if expenses were being pushed into segments.

Answer

Rob Berkley, President and CEO, clarified that Argentina's yield had come off its peak, bringing the total to 4.8%, and highlighted opportunity for improvement with new money rates at 5% versus a 4.6% domestic book yield. Rich Baio, CFO, explained that startup operating units moved from corporate to underwriting expenses, and the first half included compensation expense from special dividends on vested RSUs.

Andrew Andersen asked about the investment portfolio's domestic yield (4.6%) and any pressure from Argentina. He also inquired about the expense ratio and corporate expense, specifically if expenses are being shifted into segments.

Answer

Rob Berkley (President and CEO) clarified that Argentina's yield has decreased from its peak, contributing to an overall yield of 4.8%, and highlighted the opportunity for improvement with a 4.6% domestic yield versus 5% new money rates. Rich Baio (CFO) explained that some startup units have moved from corporate to underwriting expenses upon scaling, and first-half corporate expenses included compensation for special dividends on deferred RSUs.

Andrew Andersen from Jefferies Financial Group asked about the company's focus within the D&O market and trends in other short-tail lines like A&H and inland marine.

Answer

President & CEO W. Robert Berkley, Jr. confirmed the company participates in all segments of the D&O market and would welcome a rebound in IPO activity. He described A&H as an attractive business and noted that inland marine trends generally follow the broader property market.

Andrew Andersen from Jefferies asked about the company's focus within the D&O market and current trends in other short-tail lines like accident & health and inland marine.

Answer

President & CEO W. Robert Berkley, Jr. stated that the company participates across the D&O market, including public, private, and non-profit, and would welcome a rebound in IPO activity. He described the A&H business as attractive and noted that inland marine market trends generally follow the broader property market.

Andrew Andersen inquired about the rate environment and discipline in casualty reinsurance, specifically the professional liability component. He also asked how rates in specialty workers' comp compare to the traditional market.

Answer

Executive W. Berkley explained that the decline in professional liability reinsurance premium was a deliberate result of non-renewing treaties, particularly in D&O, cyber, and transactional liability, that no longer met the company's economic standards. He described the specialty workers' comp market as healthier, with higher rates and more appropriate rate adequacy compared to the traditional market.

Andrew Andersen of Jefferies Financial Group inquired about the differing growth opportunities in casualty reinsurance versus casualty insurance and asked for more detail on the prior year reserve development in the reinsurance segment.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda Limited, noted that reinsurance opportunities have been more attractive, but primary insurance casualty pricing is now improving, prompting that team to 'lean back in.' Mark Pickering, Group CFO & Treasurer, clarified that recent deep dives revealed unfavorable experience in 2021 and prior accident years for casualty lines, leading to reserve strengthening, which was partially offset by favorable development elsewhere.

Andrew Andersen from Jefferies asked about the differing growth strategies for casualty lines in the Insurance versus Reinsurance segments. He also requested more detail on the prior year reserve development, specifically the adverse development in casualty reinsurance that offset favorable development elsewhere.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda, explained that reinsurance casualty pricing has been more attractive recently, but primary insurance casualty rates are now improving, prompting the insurance team to lean back in. Group CFO Mark Pickering clarified that the adverse casualty development stemmed from a Q2 deep dive on 2021 and prior accident years, leading to reserve strengthening in line with the company's philosophy of reacting quickly to unfavorable trends.

Andrew Andersen of Jefferies Financial Group asked about the differing growth strategies for casualty business in reinsurance versus insurance. He also requested more detail on the unfavorable development in casualty reinsurance that partially offset favorable development elsewhere.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda Limited, explained that reinsurance opportunities in casualty were more attractive previously, but now primary insurance casualty pricing is improving, which may lead to growth there. Mark Pickering, Group CFO & Treasurer, clarified that quarterly deep dives identified unfavorable experience from the 2021 and prior accident years in casualty lines, prompting the company to strengthen reserves in line with its philosophy of responding quickly to adverse trends.

Andrew Andersen of Jefferies asked about the differing growth approaches between casualty reinsurance and casualty insurance, and requested more detail on the specific lines or accident years contributing to the casualty reinsurance reserve strengthening.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda, explained that reinsurance opportunities have been more attractive recently, but insurance casualty pricing is now improving, and he expects that segment to pick up pace. Group CFO Mark Pickering specified that recent deep dives revealed unfavorable experience in the 2021 and prior accident years for casualty lines in both insurance and reinsurance, prompting reserve strengthening. Dunleavy added this feedback immediately informs current pricing.

Andrew Andersen of Jefferies Financial Group inquired about the 2025 guidance, asking about potential upside, the status of rate approvals for the HHIP product, and whether Q2 marked the end of HHIP's retrenchment. He also sought clarity on the catastrophe loss assumptions for the second half of the year and Hippo's wind exposure in the Southeast.

Answer

President and CEO Richard McCathron explained that while major rate increases are complete, smaller, ongoing rate actions will continue. He confirmed most of the remediation work is done but benefits are still earning into the P&L. CFO Guy Zeltser specified the baked-in catastrophe load for HHIP is about 15 points for Q3 and 11 for Q4. McCathron added that Southeast exposure is managed, with HHIP only writing well-performing new homes in Florida and the fronting business having ample reinsurance.

Andrew Andersen of Jefferies asked about the potential impact of tariffs on inflation and home sales, the timeline for achieving adjusted EBITDA profitability, and for clarification on the California FAIR Plan assessment included in the Q1 results.

Answer

President and CEO Rick McCathron addressed tariffs, noting that premium adjustments for inflation are automatically built into policy renewals, ensuring customers are adequately covered without requiring regulatory approval. CFO Guy Zeltser confirmed the company guides for both net income and adjusted EBITDA profitability in Q4 2025, with more long-term guidance to be provided at the upcoming Investor Day. Regarding the FAIR Plan, Zeltser confirmed the $45 million wildfire loss includes the assessment but stated the specific amount is not being disclosed, adding that potential future recoupments are not yet factored into guidance.

Andrew Andersen of Jefferies asked if the recent California wildfire events altered Hippo's strategy regarding exposure in the state and requested an update on derisking efforts. He also inquired about the competitive landscape for the Insurance as a Service (IAS) business and the outlook for sales and marketing expenses in 2025.

Answer

CEO Rick McCathron stated that since the fire losses were confined to the legacy portfolio and did not affect their new homes business, Hippo's California strategy remains unchanged. He confirmed that the 'project volatility' derisking work is substantially complete, with benefits still to earn into the P&L. On the IAS business, McCathron highlighted the quality of the Spinnaker platform and its full pipeline, focusing on growth with existing high-quality partners. CFO Stewart Ellis added that sales and marketing spend will remain disciplined, with a focus on efficiency and high-return growth opportunities to support the goal of achieving net income profitability by year-end 2025.

Andrew Andersen of Jefferies Financial Group inquired about the hiring and productivity of new advisors within the IAS segment and asked for clarification on the quarterly timing and impact of the headwinds affecting the Medicare business.

Answer

CEO Trevor Baldwin stated that IAS sales headcount is up 9% year-to-date and is expected to be up mid-teens for the full year, with new hires demonstrating high success rates and productivity ramping up significantly after the first year. Regarding Medicare, he explained that the negative impact from renewal churn is expected to be ratable across Q2, Q3, and Q4, as renewal revenue is recognized throughout the year, unlike new business revenue which is heavily weighted to Q1.

Andrew Andersen from Jefferies Financial Group questioned the hiring trends and productivity of new advisors within the Insurance Advisory Solutions (IAS) segment and asked about the expected quarterly impact of the Medicare business headwinds.

Answer

CEO Trevor Baldwin stated that IAS sales headcount is up 9% year-to-date and is expected to be up mid-teens for the full year. He noted new hires typically ramp up revenue generation between months 9 and 18. He also clarified that the negative impact from the Medicare business is expected to be ratable across Q2, Q3, and Q4, as renewal revenue is recognized monthly or quarterly.

Andrew Andersen from Jefferies asked for details on the new partnership with Neptune Flood, including how it differs from prior flood operations and whether Palomar would be taking on balance sheet risk.

Answer

CEO Mac Armstrong stated that the Neptune partnership expands Palomar's capabilities from inland flood to a nationwide portfolio including coastal flood. He confirmed Palomar will take underwriting risk, made possible by the company's prior reduction in wind exposure, which prevents risk stacking. He noted the program launches October 1, making it primarily a 2026 growth contributor.

Andrew Andersen from Jefferies Financial Group requested details on the new partnership with Neptune Flood, including how it differs from prior flood operations and whether Palomar would be taking on balance sheet risk.

Answer

Mac Armstrong, Chairman, CEO & Founder, explained that the Neptune partnership expands Palomar's capabilities from inland flood to a diversified nationwide portfolio including coastal flood. He confirmed Palomar will take on underwriting risk, which is feasible due to the company's prior reduction in wind exposure, preventing risk stacking. Armstrong specified that the program will launch after the hurricane season and primarily be a 2026 growth contributor.

Andrew Andersen requested details on the new strategic partnership with Neptune Flood, asking how it compares to Palomar's existing flood operations and confirming if Palomar would be taking on balance sheet risk.

Answer

Mac Armstrong, Chairman & CEO, clarified that the Neptune partnership expands Palomar's flood offering from inland-focused risk to a diversified nationwide portfolio that includes coastal flood. He confirmed Palomar will take underwriting risk, which is now feasible due to a meaningful reduction in its wind exposure, preventing risk stacking. He noted the program will be a contributor starting in 2026.

Andrew Andersen from Jefferies Financial Group asked for the expected run-rate of fronting business premium after the peak impact from a runoff, the commodity price assumptions in the $200 million crop premium target, and how the crop loss ratio would be booked in Q3.

Answer

Executive T. Uchida provided specific figures for the fronting headwind, noting a $44 million impact in Q2 and $30 million in Q3 from the runoff. Chairman and CEO Mac Armstrong stated that current commodity prices are close to levels set in February, making the impact minimal. Uchida clarified that the Q3 crop loss ratio will be a blend of expectations and actual results as they emerge, not just a pure loss pick.

Andrew Andersen asked about the methodology behind the new $8 million to $12 million catastrophe loss guide for 2025 and inquired about the outlook for the fronting business.

Answer

Executive T. Uchida explained the cat guide reflects increased confidence from de-risking the portfolio and represents 1-2 points of the loss ratio, with an additional 2-3 points budgeted for smaller 'mini cats.' CEO Mac Armstrong added that modeled losses have consistently outperformed actual results. Regarding fronting, Armstrong stated it will be a 'laggard' in 2025, impacted by the loss of a large deal for two more quarters before becoming flattish, as capital is being prioritized for other growth lines.

Andrew Andersen sought confirmation on the full-year premium outlook for the Crop business, referencing previous guidance. He also asked about the 11% rate increase in excess liability, noting it appeared to be a deceleration from the prior quarter and asking if it was due to mix shift.

Answer

Mac Armstrong, Chairman and CEO, corrected the Crop premium guidance to a range of $100 million to $125 million for the year, stating they feel good about reaching the upper end of that range. Jon Christianson, President, added that a favorable product mix shift will result in more premium being written in Q4. Regarding excess liability, Mac Armstrong explained the change in rate increase was due to a combination of mix shift and a strategic decision to tighten terms, add policy exclusions, and constrain auto exposure, which improves the risk-adjusted return.

Andrew Andersen asked about the car loss ratio improvement between first-term and renewal policies, the drivers of higher ad spend, the competitive auto market, and sought clarification on the company's premium leverage ratios.

Answer

CFO Tim Bixby noted that while a breakdown isn't disclosed, about half of overall growth comes from cross-sells. He attributed higher ad spend to timing shifts and strong channel efficiency, stating the competitive market is secondary to Lemonade's LTV models. For leverage, he confirmed the target is a 6-to-1 ratio on a gross, consolidated basis, which translates to roughly 4-to-1 on a net basis, comfortably above the 3-to-1 regulatory requirement.

Andrew Andersen asked about the flat year-over-year Technology Development spend, questioning why a tech-focused company wasn't increasing investment in this area. He also sought clarity on the 700,000-person auto waitlist, asking what it represents and how to think about its conversion potential.

Answer

CEO Daniel Schreiber and President Shai Wininger explained that flat tech spend demonstrates terrific operating leverage, as AI and automation are dramatically increasing the engineering team's productivity, allowing them to support a much larger business without proportional cost increases. Regarding the waitlist, Schreiber clarified it consists mainly of demand from states where the car product is not yet available. He stressed a disciplined rollout strategy, focusing on perfecting the product and go-to-market approach before unleashing rapid growth.

Andrew Andersen of Jefferies Financial Group questioned the decision to reduce casualty business despite favorable rates, asked for more color on the double-digit growth in the primary property book, and inquired about any changes to PML at mid-year renewals.

Answer

CEO Scott Egan stated their stance on casualty is one of caution, not discomfort, particularly in segments like commercial auto. CFO Jim McKinney added that the reduction reflects disciplined capital allocation towards more profitable opportunities elsewhere. Regarding property, Scott Egan attributed the growth to new MGA partnerships, including in the London market, which provides diversification. He stressed that peril exposures are managed tightly. Lastly, he confirmed there was no change to the company's PML, which has remained stable since its restructuring.

Andrew Andersen of Jefferies Financial Group inquired about the decision to reduce casualty business despite favorable rates, sought more color on the double-digit growth in the primary property book, and asked about any changes to PMLs at mid-year renewals.

Answer

CEO Scott Egan and CFO Jim McKinney clarified their stance on casualty is one of disciplined caution, not broad retrenchment, as they reallocate capital to the most profitable opportunities. Regarding property growth, they explained it's a diversification play driven by new, primarily non-catastrophe MGA programs in London and the U.S., with peril exposures managed tightly. Egan confirmed there were no significant changes to PMLs.

Andrew Andersen of Jefferies Financial Group questioned the decision to reduce casualty business despite favorable rates, asked for color on the drivers of double-digit growth in the primary property book, and inquired about any changes to PMLs at mid-year renewals.

Answer

CEO Scott Egan clarified they are being "cautious," not uncomfortable, with casualty and are trimming exposure in specific areas like commercial auto. CFO Jim McKinney positioned this as a disciplined capital allocation strategy to more profitable areas. Regarding property growth, Egan attributed it to new MGAs, including in London, which adds diversification. He stressed that peril exposures are managed tightly to maintain a low-volatility profile. Egan also confirmed there were no significant changes to PMLs, which have remained stable.

Andrew Andersen asked about the decision to reduce casualty premiums despite a good rate environment, sought more detail on the double-digit growth in the primary property book, and inquired about any changes to PMLs at mid-year.

Answer

The company is being cautious and disciplined with casualty, reallocating capital to more profitable opportunities rather than signaling a major rectification. The property growth comes from a smaller base and new MGA partnerships, including in London, serving as a diversification play managed within tight peril exposure limits. There have been no changes to their PMLs, which have remained stable.

Andrew Andersen of Jefferies Financial Group asked for an explanation of the amended 10-K filing, the status of the previously disclosed material weakness, and the reason for the higher cession rate in the quarter.

Answer

CFO Mark Haushill and CEO Andrew Robinson explained the amended filing is purely administrative to add a standard sentence to the auditor's opinion and does not change the unqualified opinion. Haushill noted that while they believe the material weakness is remediated, formal sign-off awaits the year-end audit. Both executives attributed the lower net premium retention to business mix, specifically strong growth in captives and A&H, which have structurally higher cessions.

Andrew Andersen of Jefferies Financial Group inquired about the demand environment for construction services within the Ventures segment, the actuarial findings that led to adverse development in the risk-managed D&O book, and whether the same third party reviewed both the reinsurance and insurance books this quarter.

Answer

CEO Tom Gayner described the Ventures environment as complicated, stating leaders must 'burn more calories to get the same unit of output,' but praised their performance. On D&O, Markel Insurance CEO Simon Wilson explained that excess layers written in 2020-2022 were too low in the tower and became a working layer due to legal inflation. CFO Brian Costanzo added that a recent spike in claim severity and frequency prompted aggressive reserving, including a management margin above actuarial recommendations. Costanzo clarified that the third-party review this quarter was only for the reinsurance book, not the insurance book.

Andrew Andersen of Jefferies Financial Group asked about the demand environment for construction services within the Ventures segment. He also sought more detail on the actuarial findings that led to the adverse development in the risk-managed D&O book and the scope of the third-party review of the reinsurance reserves.

Answer

CEO Tom Gaynor described the Ventures environment as complicated, stating it takes more effort to achieve results, but praised the leadership teams' performance. Regarding the D&O exit, Simon Wilson, CEO of Markel Insurance, explained that what was underwritten as excess layer business became a working layer due to legal inflation. CFO Brian Costanzo added that claims severity and frequency exceeded models, prompting aggressive reserving, including a management margin above actuarial recommendations, a practice also applied to the reinsurance book following its separate third-party review.

Andrew Andersen of Jefferies questioned the decision to decrease the level of caution in loss reserves given persistent social inflation, sought clarity on the baseline for the expected improvement in the underlying loss ratio, and asked about capital deployment at Nephila.

Answer

CFO Brian Costanzo explained the change in caution was due to a benign quarter, allowing for a shift of prudency from prior to current years, while maintaining a high level of redundancy in core casualty lines. He confirmed the attritional loss ratio should improve from the 2024 base as underwriting actions earn through. Regarding Nephila, Costanzo stated its strategy is to manage returns for its investors, which can involve hedging, and Markel's rated paper is used to facilitate these transactions.

Andrew Andersen asked about the size of the international business within the Insurance segment, pricing trends in that market, and whether U.S. casualty rate increases are outpacing loss trends.

Answer

Executive Jeremy Noble estimated that the international business constitutes roughly one-third of the Insurance segment. He characterized the London market as transitioning, with prices coming off very attractive levels but the business still performing strongly. For U.S. casualty, Noble confirmed double-digit rate increases which are staying slightly ahead of loss cost trends, and he expects that pricing momentum to continue into 2025.

Andrew Andersen asked about the expected duration of the growth drag from corrective underwriting actions, sought clarification on Nephila's reporting for performance fees, and inquired about any additional reserve studies planned for Q4.

Answer

Jeremy Noble, President of Insurance Operations, explained that the drag from underwriting actions should normalize into 2025, with professional liability facing more pressure than casualty. He clarified that Nephila has no reporting lag; performance fees are a small component recognized in Q4. He also confirmed that while all reserves are reviewed quarterly, no special studies are planned for Q4.

Andrew Andersen of Jefferies Financial Group inquired about AXIS Capital's current approach and appetite for business from MGAs, and asked for an assessment of the progress cedents have made in enhancing their underwriting and claims processes in the reinsurance market.

Answer

President & CEO Vincent Tizzio described the company's MGA strategy as highly selective and disciplined, focusing on bottom-line results and alignment of interest, noting challenges in classes like cyber and property where pricing can be less attractive. Regarding reinsurance, Mr. Tizzio characterized the market's progress on underwriting and claims enhancements as being in the 'mid-innings,' stating that AXIS requires more statistically repeatable evidence of improvement before it would increase its liability exposure.

Andrew Andersen asked about the drivers for the moderation in U.S. Primary and Excess Casualty rate increases and sought details on the 9% growth in professional lines, given market competition.

Answer

CEO Vince Tizzio explained the Primary Casualty rate reflected the final quarter of a significant remediation effort. For professional lines, he specified that growth was not from public D&O but from targeted investments in areas like Allied Health, lower middle market private company D&O, and international transactional liability, which are performing well.

Andrew Andersen of Jefferies asked about the typical timeframe to bring acquired businesses to target margin levels and for an update on professional liability and D&O rate trends.

Answer

President, CEO & Director J. Powell Brown and EVP, CFO & Treasurer R. Andrew Watts explained that the timeline depends on the acquisition type; standalone businesses take longer, typically 12-36 months, as integration is more gradual. On rates, Powell stated that D&O and EPL continue to face downward pressure, a trend he expects to persist.

Andrew Andersen inquired about the Property segment, noting that 30% of the business is now direct and asking about the customer appetite for that channel. He also asked if an increasingly competitive auto market changes how capital is deployed between the agency and direct channels.

Answer

CFO John Sauerland clarified that the 30% figure is for property business underwritten by Progressive, while a significant and growing portion of direct sales are through third-party partners via HomeQuote Explorer. Personal Lines President Patrick Callahan added there is a large opportunity to close the gap between direct auto and direct home penetration. CEO Susan Griffith stated they will continue to push for growth in both channels, with direct being heavily influenced by media spend and agency by relationships and incentives.

Andrew Andersen inquired about changes in bundle rates, particularly between areas where Progressive is growing its property book versus derisking. He also asked how quickly potential tariff impacts could be reflected in rate filings.

Answer

CEO Susan Griffith detailed the property business's mission to focus on owner-occupied properties bundled with Progressive Auto, noting the exit from the DP3 (rental property) business in 44 states. She confirmed the majority of home and rental policies are bundled with auto. Regarding tariffs, Griffith stated that as soon as impacts appear in their data, Progressive will incorporate them into pricing indications and file for rate changes with state regulators, suggesting a relatively quick reaction time is possible.

Andrew Andersen asked if the strong underlying results in North America Commercial create an opportunity for AIG to take more business net. He also questioned if the 4% pricing increase (ex-comp/financial lines) is below loss trend and whether management still expects no underlying loss ratio deterioration.

Answer

Peter Zaffino, Chairman and CEO, replied that while AIG could take more risk net, it prefers the volatility reduction provided by its current reinsurance structure for both property and casualty. He affirmed that they do not expect underlying loss ratio deterioration, noting that while property pricing was a headwind, strong pricing in casualty is above loss trend and the overall portfolio is balanced by a strong international book.

Andrew Andersen of Jefferies asked for an update on how much of the Auto and Homeowners books are open for new business, given property-related constraints. He also inquired about pricing and growth trends in the workers' compensation line.

Answer

Michael Klein, President of Personal Insurance, explained that while they are open for business in most geographies, property capacity is being carefully managed based on profitability, catastrophe exposure, and concentration, which can constrain auto growth. Greg Toczydlowski, President of Business Insurance, stated that workers' comp pricing continues to be down, and a change in audit premium levels versus last year's historic highs also impacted the net written premium figure.