Cave Montazeri

Cave Montazeri asked about the factors contributing to Baleen's accelerated growth in the second half of 2025 and the growth outlook for 2026, and inquired if Bowhead would consider increasing the risk profile of its investment portfolio given the new money yield being below the book yield.

Answer

CEO Stephen Sills attributed Baleen's growth to increased broker acceptance, consistent messaging on offerings and service, and expanded marketing efforts leading to more distribution points. He also highlighted the future contribution of the Express technology. CFO Brad Mulcahey confirmed that Bowhead would not increase the risk profile of its investment portfolio, maintaining a conservative position despite the duration extension.

Cave Montazeri asked about the factors contributing to Baleen's accelerated growth in the second half of 2025 and the outlook for its growth in 2026. He also inquired if Bowhead would consider increasing the risk profile of its investment portfolio, given that the new money yield is below the book yield.

Answer

Stephen Sills, CEO, attributed Baleen's growth to increased broker acceptance, consistent messaging, enhanced infrastructure, and expanded distribution points, noting that success breeds success. He also highlighted the future contribution of the 'Express' technology for smaller business. Bradley Mulcahy, CFO, explicitly stated that Bowhead would not change the risk profile of its investment portfolio, preferring to maintain a conservative position.

Cave Montazeri from Deutsche Bank AG inquired about the factors driving the accelerated growth of Baleen in the second half of 2025 and the growth outlook for Baleen in 2026. He also asked if Bowhead Specialty would consider increasing the risk profile of its investment portfolio, given that the new money yield is below the book yield, alongside the planned duration extension.

Answer

Stephen Sills, CEO, attributed Baleen's growth to increased broker acceptance, expanded marketing efforts, and the addition of more distribution points, noting that success breeds further success. He also highlighted the future contribution of the Express technology. Brad Mulcahey, CFO, firmly stated that Bowhead would not change the risk profile of its investment portfolio, maintaining a conservative position despite the duration extension.

Cave Montazeri at Deutsche Bank inquired about the risk of disruption to Arch's business model from AI, specifically whether Arch is more likely to be a net beneficiary through improved efficiencies and smarter risk selection, and asked about the highest payout ratio Arch would consider in a no-growth and no-M&A scenario for 2026.

Answer

CEO Nicolas Papadopoulo viewed AI as an opportunity for efficiency rather than a threat, particularly in the complex specialty market, where models would take time to replicate underwriting behavior. CFO and Treasurer François Morin confirmed that in a no-growth scenario, capital needs would remain flat, and generated income could create excess capital, allowing for increased buybacks, though no specific payout ratio target is set.

Cave Montazeri asked about the risk of disruption to Arch Capital's business model from AI, inquiring whether the company is more likely to be a net beneficiary through improved efficiencies and smarter risk selection, or at risk of disruption. He also asked about the highest payout ratio Arch Capital would consider in a no-growth and no-M&A scenario.

Answer

CEO Nicolas Papadopoulo views AI as an opportunity for efficiency rather than a threat, especially in complex specialty markets where models take time to replicate underwriter behavior, with benefits ultimately passed to consumers. CFO François Morin confirmed that in a no-growth scenario, generated income could create more excess capital, allowing for increased buybacks, but there is no set target for the payout ratio.

Cave Montazeri requested more color on the drivers of attractiveness in the Florida property market and sought clarification on a $94 million negative timing impact on reinsurance premium growth.

Answer

CEO Nicolas Papadopoulo explained that Florida's attractiveness stems from tort reform improving primary insurers' results, which in turn drives demand for the excess of loss reinsurance Arch provides. CFO & Treasurer François Morin confirmed that adjusting for the $94 million timing issue, reinsurance net written premium growth would have been double-digit, driven by strong, attractively priced opportunities in property cat.

Cave Montazeri asked about the drivers behind the deceleration in reinsurance net premium growth and sought management's view on casualty reserves and social inflation trends.

Answer

CFO François Morin attributed the slow reinsurance growth to a non-renewed structured deal and timing differences, suggesting an adjusted underlying growth rate of 6-7%. Executive Nicolas Alain Papadopoulo added that the specialty book is opportunistic and will see more volatility. On casualty, he stated his belief that 'more pain will come' from social inflation and the story has not fully played out.

Cave Montazeri of Deutsche Bank asked about the supply of casualty reinsurance at the 1/1 renewal, whether primary or reinsurance casualty is currently more attractive, and for an update on the MidCorp integration and its growth prospects.

Answer

Executive Nicolas Alain Papadopoulo noted that casualty reinsurance supply remains ample and that Arch is currently more bullish on the primary E&S side due to its deep underwriting expertise. He confirmed the MidCorp integration is on plan, with business performance meeting expectations and benefiting from double-digit rate increases on its property and liability books.

Cave Montazeri from Deutsche Bank sought details on the drivers behind the strong underlying growth in the reinsurance segment and questioned the reasons for growth and rising delinquencies in the mortgage insurance business.

Answer

CEO Nicolas Alain Papadopoulo attributed reinsurance growth to selective expansion in U.S. casualty, specialty lines like UK motor, and facultative property operations. Executive François Morin explained that the rise in mortgage delinquencies was expected due to loan seasoning and seasonality, and noted that reported premium growth was affected by accounting nuances, with the underlying market remaining relatively flat.

Cave Montazeri from Deutsche Bank inquired about Aspen's preferred positioning within the reinsurance tower, particularly for property catastrophe risk. He also asked about the potential for increasing duration or taking on more risk within the investment portfolio.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda, explained that Aspen prefers to write reinsurance further away from frequency, avoiding the lowest layers, and noted that retentions have held firm in the market. Group CFO Mark Pickering stated that while the investment portfolio's allocation is largely strategic, asset duration might drift slightly higher to match liabilities and lock in yields, but the focus remains on maintaining a high-quality portfolio.

Cave Montazeri from Deutsche Bank asked about Aspen's preferred positioning within the reinsurance tower for property cat risk and whether there was scope to adjust the investment portfolio's duration or risk profile.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda Limited, explained that Aspen prefers to write reinsurance further away from frequency, avoiding the lowest layers, and noted that the market has held firm on retentions. Mark Pickering, Group CFO & Treasurer, stated that while the investment allocation is largely strategic, they may let asset duration drift up slightly from its current 3.2 years to lock in yields, as it is currently below their liability duration.

Cave Montazeri from Deutsche Bank inquired about Aspen's preferred position within the reinsurance tower and which property catastrophe layers are currently most attractive. He also asked if there was capacity to increase the duration or risk profile of the investment portfolio.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda, stated that Aspen prefers to write reinsurance further away from frequency, avoiding the lowest layers, and noted that the tops of programs are most competitive. Group CFO Mark Pickering addressed the investment portfolio, indicating that asset duration might drift up from its current 3.2 years to better match liability duration and lock in yields, but the overall high-quality allocation is in line with their strategy.

Cave Montazeri from Deutsche Bank inquired about Aspen's preferred position within the reinsurance tower and which layers of property catastrophe risk are currently most attractive. He also asked about the investment portfolio, specifically if there was scope to increase asset duration or take on more risk.

Answer

Christian Dunleavy, Group President & CEO of Aspen Bermuda Limited, stated that Aspen prefers to write business away from frequency losses, thus not actively seeking lower layers in the reinsurance tower, and noted that retentions have held firm. Mark Pickering, Group CFO & Treasurer, explained that the investment portfolio's asset duration of 3.2 years is slightly below liability duration, so it may drift up to lock in yields, but the overall allocation is in line with their strategy.

Cave Montazeri asked about the state of the Pension Risk Transfer (PRT) market, comparing the US and UK, and requested an update on MetLife's implementation of and strategy for Generative AI.

Answer

Ramy Tadros, Regional President - U.S. Business, described the PRT pipeline as strong for the second half of the year, emphasizing MetLife's disciplined approach in the US and its role as a reinsurer in the growing UK market. Michel Khalaf, CEO, detailed MetLife's extensive, multi-year investments in technology, data governance, and process reengineering, which position it to leverage AI for both efficiency and growth across areas like call centers, claims, and application development.

Cave Montazeri of Deutsche Bank asked for the outlook on the Pension Risk Transfer (PRT) market for the second half of the year and the relative attractiveness of the U.S. versus U.K. markets. He also requested an update on the company's implementation of Gen AI.

Answer

Ramy Tadros, Regional President - U.S. Business, stated that while Q2 was lighter, the year-to-date PRT volume is solid, and he sees a number of jumbo cases expected to transact in H2. He noted MetLife participates in the growing U.K. market as a reinsurer. CEO Michel Khalaf highlighted that MetLife is an early adopter of AI, leveraging its scale and modernized systems. He mentioned seeing significant impacts in areas like application development, call centers, and claims, with a focus on both efficiency and growth.

Cave Montazeri from Deutsche Bank asked for the estimated capital benefit from the Bermuda reinsurance transaction and inquired about the potential impact of Generative AI on efficiency and growth.

Answer

CFO Robin Raju clarified the Bermuda deal's main benefit is creating cash flow consistency, not a material capital release, as economic capital is unchanged. Nick Lane, President of Equitable, addressed AI, stating it is currently driving operational efficiencies and is being explored for value-added services, viewing it as a tool to enhance advisor productivity rather than replace them.

Cave Montazeri asked about the reasons for the reduced sensitivity to short-term interest rates and the company's hedging philosophy. He also requested an update on technology initiatives like SimpliNow and the broader use of digital capabilities to drive growth.

Answer

CFO Elias Habayeb and CEO Kevin Hogan explained the reduced sensitivity was due to a decrease in net floating rate exposure from 8% to 5% of the portfolio as part of their active ALM strategy. Hogan highlighted the success of digital underwriting in Life Insurance and noted that savings from a recent retirement program will be reinvested into data, digital, and automation strategies across the company to improve scalability and efficiency.

Cave Montazeri of Goldman Sachs inquired about the 2025 outlook for base spread income, considering the two-quarter lag from Fed rate cuts, and asked for the correct 2024 baseline EPS for the company's 10-15% long-term growth target.

Answer

CEO Kevin Hogan acknowledged short-term headwinds from rate cuts, primarily in Individual Retirement, but stated that strong new business conditions and positive net flows should support spread income growth over time. CFO Elias Habayeb clarified that the 10-15% long-term EPS growth target should be applied to the reported 2024 EPS, noting that 2025 growth would likely be at the lighter end of that range due to the earn-in of rate cuts.

Cave Montazeri inquired about client conversations regarding the impact of tariffs, asked for regional color on the 4% international organic growth, and questioned the company's international M&A appetite.

Answer

J. Gallagher, an executive, noted that clients have concerns about tariffs, which creates opportunities for Gallagher to provide risk mitigation solutions. CFO Douglas Howell explained that international growth reflects a flatter market, particularly in Australia and New Zealand during their slow season. Regarding M&A, Gallagher stated the company follows written premium globally and can service accounts of any size, anywhere.

Cave Montazeri inquired about the motivation for Aon's first Investor Day in 20 years, asking what the company believes the market is under-appreciating about its strategy. He also sought confirmation that the Q2 adjusted EPS growth guidance of 15-18% uses the reported Q2 2024 EPS as its baseline.

Answer

CEO Gregory Case explained the Investor Day is intended to showcase the 'next-generation client experience' powered by the 3x3 plan and the $1 billion investment in Aon Business Services, which represents a massive acceleration of the Aon United strategy. CFO Edmund Reese confirmed that the Q2 EPS growth guidance is based on the reported Q2 2024 figure and was provided to help with modeling complexity from the NFP acquisition timing, while reiterating the company's focus is on full-year results.

Cave Montazeri of Deutsche Bank asked if growth in other geographies could offset homeowners policy-in-force headwinds from states like California. He also requested an update on medical claims inflation trends within workers' compensation.

Answer

Michael Klein, President of Personal Insurance, noted that while they are open for business in many areas, property constraints are not limited to California and impact their ability to grow the overall portfolio due to the packaged nature of their business. Daniel Frey, CFO, said that while medical inflation has been benign, the company remains cautious and has not changed its long-term reserving assumptions, which anticipate a return to higher inflation levels.