C. Gregory Peters

Greg Peters asked about American Integrity's process for managing risk aggregation and concentration, given the substantial growth of its book and expansion into new market areas.

Answer

Jon Ritchie, President of American Integrity Insurance Group, explained that the growth initiatives in Florida, particularly in Tri-County and middle-aged homes (disproportionately from Central Florida), strategically complement the existing portfolio. This expansion helps to geographically diversify risk and reduce pressure on peak zones like Southwest Florida, where the company already has a significant market share, thereby offsetting concerns about disproportionate risk concentration.

Greg Peters with Raymond James inquired about the competitive environment for 2026, specifically regarding new business, renewal business, and competition across new homes, older homes, and the commercial space. He also asked how the change in the quota share for 2026 would impact the general administrative and policy acquisition expense ratios.

Answer

CEO Bob Ritchie explained that while there are new competitors, American Integrity holds a leadership position in distribution channels, achieving record new business on its own terms, dominating the new builder segment, and maintaining strong relationships with national carriers and mortgage companies. CFO Ben Lurie clarified that while underlying expenses remain constant, ceding commissions from the quota share program will net against expense line items, leading to a net increase in those lines, but this will be more than offset by decreased ceded premiums, ultimately driving additional profitability. In a follow-up, Greg Peters asked about reinsurance retention for first and second events, given comments on third and fourth events. President Jon Ritchie stated that first event retention would be consistent with the 2025-2026 treaty year, with options being explored for the second event, and additional cover secured for third and fourth events, including cascading features. CEO Bob Ritchie emphasized the flexibility of cat bonds and the company's commitment to being protected against multiple major hurricanes, using the 2004 season as a benchmark. Greg Peters also questioned the low non-cat loss ratio of $0.17 gross and the expectation for it to increase. President Jon Ritchie attributed the 17% gross loss ratio to business mix, reunderwriting, and legislative reform, expecting a modest increase (1-2 points) as the company writes more Tri-County and middle-aged homes, with appropriate premiums offsetting this. CEO Bob Ritchie added that frequency has normalized post-reform, and new construction contributes to lower frequency, while inflation impacts severity. CFO Ben Lurie clarified that the gross underlying ratio removes reinsurance effects for transparency. Finally, Greg Peters asked about American Integrity's process for managing risk aggregation and concentration given its substantial growth. President Jon Ritchie explained that growth initiatives in Tri-County and middle-aged homes geographically complement the portfolio, reducing pressure on peak zones and offsetting concerns about disproportionate risk concentration.

C. Gregory Peters asked for perspective on Apollo's performance in 2025 and expectations for 2026, especially how it blends into Skyward's financial forecasts. He also inquired about Apollo's anticipated performance under the Skyward banner given increased price competition, and sought commentary on the moving pieces within the Q4 reserve development.

Answer

Chairman and CEO Andrew Robinson noted Apollo's 2025 financial results were similar to Skyward's, with ~20% growth and an ~89 combined ratio, though Apollo's expense ratio was 4-5 points higher. He affirmed that Skyward's 2026 guidance remains unchanged. Robinson expressed confidence in Apollo's portfolio construction, particularly its specialty businesses and the unique position of Syndicate 1971 in the digital economy, which is less exposed to broad market competition. CFO Mark Haushill explained that Q4 reserve development included ~ $25 million adverse development in commercial auto (accident years 2022 and 2024), offset by favorable development in shorter-tail lines. Both executives emphasized the conservative reserve profile, high IBNR, and shortened liability durations.

C. Gregory Peters of Raymond James inquired about Skyward's cycle management strategy, asking for details on the reserving approach for high-growth lines like agriculture and credit. He also asked about the outlook for investment income, given the performance and runoff of the alternative asset portfolio.

Answer

CEO Andrew Robinson explained that the company maintains a conservative reserving philosophy, particularly for lines with inherent volatility like agriculture. He noted that while the alternatives portfolio, now less than 5% of total investments, created volatility this quarter, it is in runoff and should not distract from the strong core underwriting performance. Robinson emphasized that capital from redemptions is being reinvested into the core fixed-income portfolio.

Gregory Peters of Raymond James asked for more texture on the quality of the strong submission growth, particularly in E&S. He also inquired about the size of the government-related surety business and the company's strategic approach to the program business market.

Answer

CEO Andrew Robinson characterized the E&S submission flow as high-quality but facing more competition, and highlighted a 19% increase in surety bid bonds and a 59% rise in A&H RFPs as strong leading indicators. He sized the federal contractor surety book at roughly $20 million. For programs, Robinson reiterated the 'Rule our niche' strategy, which involves partnering with specialized MGAs, ensuring alignment through ownership stakes, requiring robust data exchange, and critically, retaining claims handling in-house whenever possible.

Gregory Peters asked for the outlook on top-line growth in light of pricing pressures and the new share repurchase program, sought context on strong submission growth, and later inquired about the company's approach to the delegated underwriting (MGA) market.

Answer

CEO Andrew Robinson clarified the share repurchase is a tool for opportunistic buybacks when the stock is undervalued, not a signal of weak growth prospects, and affirmed a strong growth outlook. He attributed robust submission growth to underwriter efficiency, new talent, and strong E&S market flow. Regarding the MGA market, he described it as 'frothy' and stated Skyward is highly selective, partnering only with top-tier MGAs in strategic niches to 'Rule our Niche'.

Greg Peters from Raymond James, represented by Mitch, first asked about commercial auto renewal pricing in the fourth quarter and the additional rate required to sustain underwriting margins in 2026. He then inquired about the investment portfolio, specifically how reinvestment yields, currently 70 basis points above book yield, are expected to translate into net investment income growth in 2026 amidst a declining rate environment.

Answer

President and CEO Steve Spray reported that commercial auto rates were up mid-single digits in Q4, expressing confidence that prospective pricing exceeds loss costs. He highlighted Cincinnati Financial's focus as a package writer, not specializing in monoline auto or heavy transportation, which contributes to more predictable results and slight profitability in commercial auto for 2025. Chief Investment Officer Steve Soloria addressed investment income, anticipating that stable longer-maturity rates and strong cash flow from insurance operations will support solid net investment income growth in 2026 and beyond.

Gregory Peters of Raymond James inquired about Cincinnati Financial's new business trends, acknowledging competitive pressures, and sought the company's view on growth opportunities in California across E&S, personal, and commercial lines, including the regulatory framework.

Answer

President and CEO Steve Spray expressed satisfaction with new business numbers across all segments on an absolute basis, despite tough prior-year comparisons, especially in personal lines where the company doubled net written premium over 3.5 years. He emphasized underwriters' focus on pricing and risk segmentation over short-term top-line growth. For California, Steve Spray stated the company aims to be a stable market, updating its view of risk post-fire, particularly on aggregation. He noted that 77% of homeowner premiums in California were already E&S as of 12/31/2024, a number expected to grow, and that commercial E&S business recently entered California. He also mentioned ongoing work with the California Department of Insurance on regulatory matters.

C. Gregory Peters of Raymond James asked for an update on the personal lines business, specifically the strategic reset in California following the wildfires. He also inquired about reinsurance, asking if subrogation rights were sold and requesting details on the newly purchased additional catastrophe layer and the company's net retention for hurricane events.

Answer

President & CEO Stephen Spray confirmed that the company is implementing lessons learned in California around model recalibration and aggregation management. He stated that subrogation rights have not been sold. Regarding reinsurance, he explained that CINF added a $300M layer excess of $1.5B via the traditional market and clarified that the company's all-perils property cat treaty has a single $300M retention for events like hurricanes or wildfires.

C. Gregory Peters of Raymond James asked about the company's future exposure strategy in California personal lines, whether subrogation rights for the wildfires were sold, and for details on the new reinsurance layer and its impact on hurricane season exposure.

Answer

President & CEO Stephen Spray confirmed the company is implementing lessons learned in California around model recalibration and aggregation and has not sold its subrogation rights. He explained that an additional $300M reinsurance layer was purchased for balance sheet protection due to premium growth. He clarified the entire property cat treaty was reinstated and is an 'all perils' contract with a $300M retention, covering hurricanes and other events.

Gregory Peters of Raymond James questioned the gross loss estimate for the California wildfires, the potential for increased rate activity in the California homeowners market, and whether the commercial lines pricing cycle is peaking.

Answer

President and CEO Steve Spray declined to provide a gross loss number for the active catastrophe, sticking to the net range of $450M-$525M. He noted that 77% of their California homeowner premiums are non-admitted and a post-event review will determine any strategy changes. On pricing, Mr. Spray stated that commercial lines rates are still in the high single-digits and emphasized that policy-by-policy underwriting continues to drive profitable growth.

Gregory Peters asked for perspective on the 'new business penalty' given the 'generational opportunities' in personal lines, how the business profile has changed with growth, and the company's strategy for new agency appointments in 2025.

Answer

President and CEO Steve Spray stated he doesn't believe in a 'new business penalty,' citing confidence in prospective pricing. He explained the personal lines book has evolved with significant growth in high-net-worth clients, providing diversification. He confirmed plans to continue expanding agency distribution at a clip similar to recent years, focusing on professional, aligned agents.

C. Gregory Peters asked for an update on the competitive landscape in auto and home insurance, considering Allstate's in-force growth and reports of other companies becoming more aggressive.

Answer

Thomas J. Wilson (CEO, Allstate Corporation) highlighted Allstate's competitive strengths across product differentiation, pricing, brand, and distribution, attributing market share gains to Transformative Growth. Jesse Edward Merten (CFO, Allstate Corporation) detailed state-level growth in auto and homeowners, and Mario Rizzo (President, Property-Liability, Allstate Corporation) discussed the growth and competitive strategy for Protection Plans, including new partnerships and international expansion.

C. Gregory Peters asked about the evolving regulatory and legislative environment, specifically how regulators might influence Allstate's rate relief strategies over the next 24 months, and later inquired about the competitive landscape in auto and home insurance, considering Allstate's in-force growth and price reductions.

Answer

CEO Thomas J. Wilson explained that affordability is a countrywide issue, highlighting the SAVE program's impact and the need for tort reform to reduce bodily injury costs, citing Florida, Louisiana, and Georgia as positive examples. Regarding competition, Mr. Wilson described the highly competitive market, Allstate's Transformative Growth initiatives, and specific competitors in auto (Progressive, GEICO, State Farm) and home (mutuals). CFO Jesse Edward Merten elaborated on how Transformative Growth efforts, including ASC product rollout, expense reduction, and marketing sophistication, enable Allstate to compete effectively and achieve growth in auto and home. President, Property-Liability Mario Rizzo added details on the growth of the protection plans business through new partners, category expansion, and international reach.

Gregory Peters from Raymond James followed up on Allstate's retention strategy, asking how technology will help improve retention, particularly in personalizing customer experiences, given the changing business mix.

Answer

CEO Tom Wilson clarified that technology will enable less labor-intensive personalization, such as tailoring offers. Property-Liability President Jess Merten detailed efforts like the SAVE program, which uses technology to identify savings opportunities (e.g., discounts, telematics) and improve customer value, thereby enhancing retention.

Gregory Peters from Raymond James followed up on Allstate's retention strategy, asking how technology will help improve retention, particularly in personalizing customer experiences, given the changing business mix.

Answer

CEO Tom Wilson clarified that technology will enable less labor-intensive personalization, such as tailoring offers. Property-Liability President Jess Merten detailed efforts like the SAVE program, which uses technology to identify savings opportunities (e.g., discounts, telematics) and improve customer value, thereby enhancing retention.

C. Gregory Peters from Raymond James asked for an update on auto insurance frequency trends and the company's view on the long-term impact of accident avoidance technology and autonomous driving. He also requested details on the changes to Allstate's reinsurance program for the current year.

Answer

Tom Wilson, Chairman, President & CEO, explained that while autonomous driving's engineering hurdles are largely solved, the economic challenge of fleet turnover remains, leading to a gradual decline in frequency but higher repair costs. Mario Rizzo, President of Property-Liability, noted that current frequency trends are favorable, continuing a pre-COVID downward trajectory. On reinsurance, EVP and CFO Jess Merten detailed that the total catastrophe limit was increased by $2 billion to over $11 billion at a 10% risk-adjusted cost decrease, including an additional $325 million in aggregate coverage.

Gregory Peters asked about the long-term objective for the adjusted expense ratio and its relation to advertising spend. He also inquired about the impact of potential subrogation on Q1's large catastrophe loss and sought details on the updated reinsurance program.

Answer

Thomas Wilson (executive) explained the goal is to continuously lower the expense ratio through digitization, with no specific numerical target. On catastrophes, Mario Rizzo (executive) confirmed they would pursue any potential subrogation recoveries. Jesse Merten (executive) detailed that the reinsurance limit was increased by $1.5 billion to reflect the growing homeowners business, with the placement going well and risk-adjusted costs expected to be down.

Gregory Peters asked for an update on Allstate's competitive pricing position in auto insurance and whether proactive retention efforts would lead to changes in agent compensation. He also questioned the sustainability of the high 26.8% ROE and future targets.

Answer

CEO Thomas Wilson stated that there are no plans to change agent compensation, as it is already heavily tied to renewals, making branded agents ideal for retention efforts. Executive Mario Rizzo added that strong new business trends indicate competitive pricing. Regarding ROE, Wilson explained that the previous 14-17% target is outdated due to structural changes and a different interest rate environment. He emphasized that the current strategic priority is driving shareholder value through growth, particularly in auto policies, rather than setting a new ROE target.

Greg Peters inquired about Chubb's approach to foreign exchange volatility in its global overseas operations and enterprise risk management, and how the company views the evolving trend of agentic AI and digital infrastructure, including insurance and investment opportunities.

Answer

Evan Greenberg, Chairman and CEO of Chubb, stated that the company does not hedge revenue or income, only large remittances, and matches assets and liabilities in currency. He acknowledged FX impact on growth and income, noting it's an uncontrollable variable. Regarding AI and digital infrastructure, Mr. Greenberg detailed Chubb's extensive global capabilities in insuring data centers across various exposures (property, marine, liability, energy) and mentioned doubling down on internal structure. He cautioned against being overly optimistic due to headwinds like energy availability and supply chain issues, and expressed a cautious investment approach.

Greg Peters asked about Chubb's management of foreign exchange volatility in its overseas operations, considering geopolitical factors, and how the company views the evolving landscape of agentic AI and digital infrastructure, including its participation and potential investment opportunities.

Answer

Evan Greenberg, Chairman and CEO of Chubb, stated that the company does not hedge revenue or income, only large remittances, and matches assets and liabilities in currency. He acknowledged FX volatility as an external factor. Regarding AI and digital infrastructure, Mr. Greenberg detailed Chubb's extensive global capabilities in insuring data centers across various lines (Builders' Risk, property, liability, etc.) and mentioned doubling down on internal structure. He expressed caution as an investor, citing potential headwinds like energy availability, labor, and supply chains.

C. Gregory Peters of Raymond James inquired about the impact of litigation challenges and social inflation on casualty and general liability coverages, and the prospects for tort reform at the federal and state levels.

Answer

Chairman & CEO Evan Greenberg clarified that while social inflation is a significant public policy issue for the country, Chubb's role as an insurer is to price for that risk. He emphasized that the industry intermediates money, not prints it, and must charge appropriately for the hostile liability environment. The full response was interrupted by technical difficulties.

C. Gregory Peters of Raymond James inquired about the litigation challenges highlighted in a recent Wall Street Journal op-ed, its impact on casualty and general liability coverages, and the outlook for tort reform.

Answer

Chairman & CEO Evan Greenberg clarified that the op-ed was a public policy statement on the inflationary costs of litigation for the country, separate from Chubb's business operations. He emphasized that the insurance industry's job is to price for this hostile liability environment. The remainder of his response was interrupted by technical difficulties.

Gregory Peters asked for a big-picture perspective on the growth drivers for the Life Insurance business in 2025 and for commentary on the P&C market cycle, competition, and Chubb's positioning.

Answer

Chairman and CEO Evan G. Greenberg projected continued double-digit income growth for the Life Insurance business, driven by margin expansion and growth in Asia. He described the P&C cycle as being in a sustained inflationary period, with competition rising in large accounts and financial lines. However, he noted that over 80% of Chubb's business, particularly middle market and consumer lines, has favorable growth opportunities due to secular shifts.

Gregory Peters of Raymond James asked for clarification on why Life Insurance income growth wasn't tracking as high as premium growth and inquired about any changes to the company's capital management strategy.

Answer

CFO Peter Enns explained that international life income growth was indeed tracking closely with premium growth and that year-over-year comparisons for the combined business were affected by a non-recurring item in the prior year. Chairman and CEO Evan G. Greenberg added that the capital management approach is 'steady as she goes,' balancing healthy capital returns with retention for growth opportunities.

C. Gregory Peters asked about Brown & Brown's strategy for retaining producers and its legal defenses concerning customer relationships and company intellectual property, in light of 275 former teammates joining a competitor and $23 million in associated revenue loss.

Answer

J. Powell Brown, CEO, explained that the company's producer compensation mix of cash and equity has been effective, and there are no changes to their retention strategy, viewing this as an unusual instance. He also outlined typical industry non-piracy and non-solicitation agreements, which generally cover customers and teammates for two years and intellectual property in perpetuity, while acknowledging ongoing legal actions.

C. Gregory Peters asked about Brown & Brown's strategy for retaining producers and its legal defenses concerning customer relationships and company intellectual property, in light of 275 former teammates joining a competitor and $23 million in associated revenue loss.

Answer

J. Powell Brown, President and Chief Executive Officer, explained that the company's producer compensation model, a mix of cash and equity based on performance, remains effective and unchanged. He characterized the recent departures as a highly unusual instance. Regarding legal defenses, Mr. Brown noted the industry's typical non-piracy and non-solicitation agreements, which usually span two years for customers and teammates, and perpetual protection for intellectual property, while refraining from discussing ongoing litigation.

C. Gregory Peters of Raymond James sought details on the pending acquisition of Ascension, focusing on the timing of synergies, the organic growth profile of the acquired businesses, and the nature of a $750 million set-aside.

Answer

President, CEO & Director J. Powell Brown reiterated that synergies would be realized over 3.5 years and praised the talent and specialization within Ascension. He noted their growth profile is similar to Brown & Brown's. He clarified the set-aside is for discontinued operations that are in runoff, a matter on which extensive due diligence was performed.

Gregory Peters asked for more detail on the variables affecting the Retail segment's Q3 organic growth and inquired about the impact of deferred tax payments on the company's free cash flow conversion rate for 2024 and 2025.

Answer

J. Powell Brown, an executive, stated that one quarter does not make a trend and the company feels good about its Retail business. R. Watts, an executive, explained that the 2024 free cash flow conversion ratio guidance is raised to 24-26% due to deferred tax payments related to recent hurricanes. He confirmed these payments are due in Q2 2025, which will subsequently lower the 2025 conversion rate.

C Gregory Peters asked about the expected structural shift in Travelers' expense ratio given significant technology investments, and potential regulatory impacts on AI benefits. He also inquired about regulatory pushback on Personal Insurance profitability.

Answer

Alan Schnitzer, Chairman and CEO, and Dan Frey, CFO, explained that the expense ratio is actively managed, allowing flexibility to either let efficiency gains fall to the bottom line or reinvest. They noted that claim organization efficiencies impact the loss ratio. Alan Schnitzer also stated that the regulatory environment for AI is constructive, with Travelers actively engaging policymakers. Regarding Personal Insurance profitability, Alan Schnitzer clarified that while 2024 and 2025 were good years, the prior two years had combined ratios over 100%, and the five-year average was below target returns, indicating they are not over-earning.

Gregory Peters inquired about Travelers' consolidated top-line growth outlook for 2026 and 2027, considering current headwinds in Business Insurance property, Corvus, and Personal Insurance underwriting actions. He also asked about the potential impact of AI and technology on the expense ratio and headcount reductions over a three-to-five-year period.

Answer

Alan Schnitzer, Chairman and CEO, stated that Travelers aims for industry-leading return on equity and growth over time, expressing confidence in their value proposition and investments. Regarding AI, Mr. Schnitzer highlighted significant investment and expected benefits, focusing on creating operating leverage rather than specific expense ratio targets beyond next year. Dan Frey, EVP and CFO, added that the company is very bullish on AI and the data available to fuel it.

Gregory Peters of Raymond James inquired about the pricing environment in Business Insurance, specifically asking if the pricing pressure seen in large national property accounts could impact the middle market and select businesses. He also asked about the expected impact on premium production and policy growth from relaxing restrictions in Personal Lines by the end of the year.

Answer

Greg Tislowski, President of Business Insurance, clarified that the softer pricing was in large national property accounts and would have minimal leakage into the top end of the middle market. CEO Alan Schnitzer added that pricing in other lines remains strong. Michael Klein, President of Personal Insurance, explained that relaxing property restrictions reflects progress in profitability and is expected to support auto production, with most actions completed by year-end 2025.

Gregory Peters asked about Business Insurance pricing, questioning if price competition from the large national account property market could affect middle market and select business. He also inquired about the impact of relaxing restrictions in Personal Lines on future premium and policy growth.

Answer

Greg Tislowski, President of Business Insurance, clarified that any pricing pressure was in National Property and would have minimal impact on the middle market. Alan Schnitzer, Chairman and CEO, reinforced the overall strength of the market. Michael Klein, President of Personal Insurance, stated that relaxing property restrictions reflects progress on profitability and is expected to support auto growth, with most actions completed by year-end 2025.

Gregory Peters asked about Business Insurance pricing, specifically the potential for price competition from the subscription market to affect middle market and select accounts. He also inquired about the expected impact of relaxing restrictions in Personal Lines on premium and policy growth by year-end.

Answer

Greg Tislowski, President of Business Insurance, clarified that softer pricing is confined to large national property accounts with minimal leakage into the middle market. CEO Alan Schnitzer added that overall pricing remains strong and high retention indicates a stable market. Michael Klein, President of Personal Insurance, explained that relaxing property restrictions reflects progress in profitability and will help drive growth in the auto segment, with most actions expected to be complete by the end of 2025.

Gregory Peters with Raymond James asked for details on Progressive's new product models, specifically personal auto products 8.9 and 9.0, and property next-gen product 5.0, and the material differences between them. He also inquired about the company's view on emerging technology like autonomous driving and its long-term implications.

Answer

Tricia Griffith, President and CEO, explained that Progressive continuously updates its models to incorporate more predictive variables. Pat Callahan, President of Personal Lines, detailed that new products aim to better match rate to risk using extensive data and introduce differentiating coverages, such as Progressive Vehicle Protection in 8.9 and embedded renters insurance in 9.0. Tricia Griffith discussed monitoring autonomous driving since 2012, noting its potential to make cars safer and reduce frequency, and Progressive's 'execute, expand, explore' strategy to adapt and grow in new areas.

Gregory Peters asked for details on Progressive's new personal auto products (8.9 and 9.0) and property next-gen product (5.0), inquiring about the material differences. He also sought Progressive's perspective on emerging technology like autonomous driving and its long-term impact.

Answer

President and CEO Tricia Griffith explained that Progressive continuously updates its product models to incorporate more predictive variables. President of Personal Lines Pat Callahan added that new products aim to better match rate to risk using extensive data and introduce differentiating coverages. Examples include Progressive Vehicle Protection in 8.9 and embedded renters insurance in 9.0. Regarding autonomous driving, Griffith stated Progressive has been monitoring it since 2012, building safer car components into models, and is revising its runway model. She noted that while frequency has not significantly changed with current autonomous vehicle use, the company is exploring growth in new areas, leveraging its data and scale, acknowledging the uncertain timeframe for full autonomy.

C. Gregory Peters of Raymond James asked for perspective on the 12% LAE factor used in the presentation, inquiring about historical trends and the potential for future improvements from technology. He also questioned if price decreases could disrupt retention by triggering consumer shopping.

Answer

Tricia Griffith, CEO, President & Director, stated that LAE has consistently decreased over the last 10-15 years and that they continue to focus on cost reduction through technology. Bradley Granger, National Automobile Pricing Leader, added that the 12% figure was illustrative. Regarding price decreases, Griffith explained they typically spur new business growth rather than disrupt retention, though the current shopping environment remains highly volatile due to many factors.

Gregory Peters asked for perspective on investment income growth, new money yields, and asset allocation. He also questioned the continued use of the Snapshot dongle, asking how many people still use it compared to mobile apps.

Answer

Chief Investment Officer Jonathan Bauer explained that the investment strategy is focused on long-term total return to drive ROE, not a specific book yield. The portfolio began the year conservatively but is positioned to act on opportunities. Regarding Snapshot, CEO Susan Griffith and Personal Lines President Patrick Callahan clarified that while the majority of new UBI customers opt for the mobile app, the dongle is still used and provides valuable vehicle data for refining models. UBI adoption continues to be a key differentiator.

Gregory Peters asked about changes to agent compensation to drive profitable growth and how Progressive manages staffing and technology amidst its rapid expansion.

Answer

Executive Patrick Callahan described a commission structure that rewards agents for both volume and quality. CEO Susan Griffith explained that staffing success comes from hiring in advance of need. She also highlighted the long-standing use of AI and chatbots to improve efficiency and allow employees to handle complex issues.

Gregory Peters inquired about the $160 million in AssuredPartners synergies, their geography, and whether they are included in current estimates. He also asked about the accounting for AssuredPartners' business during the earnout period and Chairman and CEO J. Patrick Gallagher, Jr.'s perspective on the pricing cycle over the next 2-3 years.

Answer

CFO Douglas K. Howell confirmed synergies are not in current estimates, expecting them to be split across revenue uplifts, workforce efficiencies, and operating expenses, with larger synergies by early 2028. He clarified that moving AssuredPartners' business to RPS would be legacy Gallagher organic growth and that they are integrating systems quickly. Chairman and CEO J. Patrick Gallagher, Jr. described the current pricing cycle as different, with 'cycles within the cycle' by line of business and bifurcation by client size.

C. Gregory Peters of Raymond James asked for more detail on the long-term drivers of margin expansion for 2026 and beyond. He also inquired about the integration process for Assured Partners, specifically if suspended workstreams have resumed and if the closing delay will impact synergy realization.

Answer

CFO Douglas K. Howell outlined several margin drivers including a culture of continuous improvement, AI successes, technology investments, and the scalability of their operating model, promising more detail at the September investor day. CEO J. Patrick Gallagher clarified that high-level integration planning continued during the review period and they are ready to "hit the ground running," with Mr. Howell adding that only a few of the thirteen workstreams were paused.

C. Gregory Peters of Raymond James asked for more detail on the long-term drivers of margin expansion, particularly for 2026 and beyond, and questioned if the delay in the Assured Partners closing would impact the timeline for realizing synergies.

Answer

CFO Douglas K. Howell pointed to a culture of continuous improvement, AI projects, and technology investments as key long-term margin drivers, promising more detail at the upcoming Investor Day. CEO J. Patrick Gallagher stated they are "ready to hit the ground running" on the Assured Partners integration, maintaining that it will be accretive in its first year. CFO Howell added that they only lost a few months of progress despite the longer closing timeline.

Greg Peters asked for more color on the pricing divergence between small-to-midsize accounts and large accounts, and questioned if there were any changes to the company's perspective on the opportunities with the pending AssuredPartners acquisition.

Answer

J. Gallagher, an executive, confirmed that larger accounts, which are often better risk-managed, are seeing better pricing due to their negotiating power. CFO Douglas Howell added that the trend is linear, with smaller accounts seeing higher rate increases. Regarding AssuredPartners, Gallagher stated their excitement has grown, noting strong employee retention at AP and positive interactions between the teams.

Gregory Peters from Raymond James asked for perspective on how the California wildfires might impact Gallagher's operations, including its RPS wholesale business. He also questioned the cause of lower contingent commissions in the quarter and the outlook for their recovery.

Answer

CEO J. Gallagher stated that the company is actively managing hundreds of claims from the wildfires and, as a major player in California, expects to be very busy for months. CFO Douglas Howell addressed the contingent commissions, explaining the shortfall was not a trend but a ~$7 million blip caused by slightly higher year-end loss ratio estimates from carriers and poor results on three specific contracts in Canada. He expects contingents to bounce back.

Gregory Peters asked about the drivers of Risk and Broking's organic revenue growth, specifically inquiring if the third quarter results included unusual wins or project-based placements, and sought details on nuanced line of business or geographic contributions.

Answer

Carl Hess, CEO of WTW, highlighted the 6% R&B growth. Lucy Clarke, President of Risk and Broking, explained that strong new business across global markets and specialty lines (construction, M&A surety, credit risk solutions) contributed significantly. She clarified that project-based placements are a normal part of specialty business growth, with increased contributions from multi-year projects in the quarter. Andrew Krasner, CFO, addressed concerns about margin pressure, reaffirming commitment to 100 basis points of average annual adjusted operating margin expansion over three years, driven by technology investments and process improvements, independent of top-line growth.

Gregory Peters asked about the drivers of Risk and Broking's organic revenue growth, specifically inquiring if the third quarter's results reflected unusual or non-recurring project-based placements and how this might impact the segment's ability to achieve its 100 basis points of annual margin improvement target given a more challenging revenue environment.

Answer

Carl Hess, CEO, highlighted the 6% R&B growth (7% excluding book of business and fiduciary income) driven by specialization and investments. Lucy Clarke, President of Risk and Broking, confirmed strong new business across global markets and specialty lines, noting that project-based placements are a normal part of specialty business growth. Andrew Krasner, CFO, reiterated commitment to the 100 basis points average annual margin expansion over three years, citing technology investments and process improvements as key drivers despite top-line challenges.

Asked for details on the moving pieces affecting free cash flow in 2025, an update on the long-term 16% conversion ratio target, and clarification on where foreign exchange and reinsurance JV headwinds would appear in the financial statements, including any seasonality.

Answer

The company is focused on improving free cash flow margin. The 2024 normalized free cash flow margin was around 18.4%. For 2025, they expect continued expansion despite headwinds from residual transformation costs (approx. $90M) and cash taxes on the Willis Re earnout (up to $90M). The reinsurance JV headwind will be reported below the operating margin line. The primary FX exposures are to the sterling, euro, and Canadian dollar, with an expected $0.08 headwind in Q1 out of $0.18 for the full year.

Gregory Peters focused on cash flow numbers, asking about any step change in Verisk's conversion rate or free cash flow on an annual basis, the driving factors, and how Q3 results should inform expectations for 2026.

Answer

Elizabeth Mann, Verisk's Chief Financial Officer, attributed strong free cash flow to a cash tax benefit in Q3, a Q1 tax refund, and improved collections/lower DSOs from ERP implementation. She estimated normalized free cash flow growth to be roughly in line with EBITDA growth, fueling capital allocation for organic investment, M&A, and shareholder returns.

Gregory Peters focused on the cash flow numbers, asking about discrete items like tax, any step change in the free cash flow conversion rate, its driving factors, and how Q3 results might extrapolate to 2026.

Answer

CFO Elizabeth Mann highlighted strong free cash flow, noting a cash tax benefit in Q3 and a Q1 tax refund. She also mentioned improved collections and lower DSOs due to ERP implementation, estimating free cash flow growth to be roughly in line with EBITDA growth, fueling capital allocation.

C. Gregory Peters of Raymond James & Associates, Inc. asked for clarification on Verisk's capital allocation plan, specifically how it intends to both delever its balance sheet and continue share repurchases after the AccuLinks acquisition.

Answer

CFO Elizabeth Mann explained that the financing includes prepayable debt. The company's strong free cash flow, which will be enhanced by the acquisitions, will enable a combination of debt reduction and ongoing share buybacks, although the pace of repurchases may be more moderate than in periods without M&A.

Gregory Peters questioned the 7.3% business insurance pricing benefit, asking about increasing price competition and pressure points in middle/large business and global specialty, especially given market chatter about deceleration. He also sought an update on the technology budget, its allocation between legacy systems and new initiatives, and the company's overall tech outlook, including potential benefits like headcount reduction.

Answer

Chairman and CEO Christopher Swift clarified that the 7.3% pricing is ex-workers' compensation, noting a sequential drop but emphasizing continued discipline in liability lines. President Mo Tooker stated the market is fairly priced, highlighting The Hartford's strong underwriting tools and strategic pullbacks in competitive areas like public D&O and large property. Regarding technology, Christopher Swift outlined a $1.3 billion all-in IT budget, with over $500 million for investment, focusing on augmenting human talent and improving processes. CFO Beth Costello clarified that 'run' costs also relate to modern systems, not just legacy.

Gregory Peters from Raymond James inquired about pricing trends, specifically the 7.3% ex-workers' compensation benefit, and potential pressure points from increased competition in middle/large business and global specialty. He also asked for an update on The Hartford's technology budget, its allocation between legacy systems and new initiatives, and the overall tech outlook.

Answer

Chairman and CEO Chris Swift noted a slight sequential drop in ex-comp pricing but emphasized continued discipline in liability lines, with commercial auto holding at 10% and excess/umbrella in low double digits. President Mo Tooker stated the market remains fairly priced, highlighting The Hartford's market-leading underwriting tools and strategic pullbacks in competitive areas like public D&O and large property. Regarding technology, Mr. Swift detailed a $1.3 billion all-in IT budget, with over $500 million allocated to investments, focusing on augmenting human talent, creating frictionless experiences, and modernizing core platforms. CFO Beth Costello clarified that 'run' costs also support modern systems, not just legacy.

C. Gregory Peters from Raymond James sought more color on the company's data science and AI advancements, asking if the 75% automated bind ratio in Small Business is a final target and how this technology might be applied to Middle Market. He also asked for framing on the upcoming year-end asbestos reserve review.

Answer

Chairman & CEO Christopher Swift and President A. Morris Tooker confirmed the playbook is to emulate the AI-driven automation from Small Business in the Middle Market to enhance speed and efficiency. Regarding the reserve review, Swift stated he doesn't anticipate anything dramatically different from past years, as the underlying drivers of asbestos claims remain.

Gregory Peters inquired about the outlook for property reinsurance pricing conditions for 2026, considering the "light year" for catastrophes, increasing PMLs, and growth in property CAT and non-CAT reinsurance business.

Answer

Jim Williamson, President and CEO, stated that the environment remains favorable, even with potential 10% price decreases at 1/1, and emphasized disciplined underwriting based on long-term pricing trajectory rather than short-term CAT activity.

Charles Gregory Peters questioned Everest Group's confidence in its casualty reserves within the reinsurance business, especially following the cleanup of its insurance operations. He also asked about the outlook for property reinsurance pricing conditions in 2026, considering a 'light year' and increasing PMLs.

Answer

Jim Williamson, President and CEO, differentiated the portfolios, stating the insurance book was 'bottom quartile' while reinsurance is 'top quartile' with consistent disciplined underwriting. Regarding property reinsurance, Mr. Williamson noted a still favorable environment despite likely 10% price decreases at 1/1/2026, emphasizing selectivity and long-term strategy over short-term market reactions.

C. Gregory Peters of Raymond James questioned the discrepancy between Everest's commentary on reinsurance pricing and reports from brokers and other carriers suggesting more significant pricing pressure at the July 1 renewals. He also asked how Everest is navigating price competition in the large-account insurance market.

Answer

Jim Williamson, President & CEO, attributed Everest's more favorable reinsurance pricing to its focus on a 'sweet spot' in programs, its status as a lead market, and writing non-concurrent terms. He acknowledged that broker data is broader and includes more competitive facultative markets. In insurance, Williamson conceded that the large-account property market is competitive but stated that pricing remains adequate. He noted Everest is becoming more selective in North America while pursuing growth in international markets and specialty lines.

Gregory Peters sought to reconcile Everest's commentary on 'moderate pricing pressure' in property cat with market reports of significant rate reductions, and asked about the potential for subrogation recoveries from the California wildfire.

Answer

CEO Jim Williamson explained that while property cat rates are softening, they are coming off historically high levels, and expected returns remain excellent and well above the company's threshold for deploying capital. Regarding the wildfire, he stated that while subrogation recoveries could benefit Everest over time, the company is taking no credit for them in current financials due to the lengthy process involved.

Greg Peters inquired about Old Republic's methodology for measuring excess capital, seeking clarification on whether there has been a strategic shift in capital retention and the specific ratios or metrics considered for capital management. He also asked for details on the Everett Cash Mutual Insurance Company (ECM) acquisition, its fit into Old Republic's portfolio, and if it will be considered a new specialty operating company. Finally, he questioned potential new regulatory pressures building in the title insurance business across other states, beyond the ongoing challenges in Texas.

Answer

Craig Smiddy, President and CEO, explained that Old Republic continues to generate operating income and retained earnings faster than capital can be returned to shareholders, clarifying there has been no major shift in strategy. He confirmed ECM will be a new operating company, aligning with Old Republic's decentralized model and cultural tenets, focusing on farm and ag business with short-tail lines. Carolyn Monroe, President and CEO of Old Republic National Title Insurance Group, confirmed the regulatory front has been 'fairly quiet,' with the Texas rate rollback appeal being the only significant brewing issue.

C. Gregory Peters of Raymond James inquired about renewal retention trends in the specialty P&C business, competitive pressures in the large account market, the potential impact of a proposed title insurance rate decrease in Texas, and the growth drivers for the home/auto warranty and cyber insurance businesses.

Answer

President & CEO Craig Smiddy stated that renewal retentions are strong (over 85%) due to a service-oriented value proposition, differentiating their property book from cat-heavy peers. He noted the large account business is sticky due to long-term, service-focused relationships. Regarding Texas title rates, Smiddy and Title CEO Carolyn Monroe explained the proposed decrease is currently challenged in court and they believe the final rate will remain adequate. Smiddy also clarified that growth in the warranty segment is driven by auto, not home, due to new partnerships. For the new cyber initiative, he outlined a deliberate, long-term strategy, focusing on building the team and waiting for pricing adequacy before writing significant business.

Gregory Peters of Raymond James asked for clarification on Old Republic's capital management plans, specifically share repurchase expectations for the remainder of 2024 and into 2025. He also inquired about the growth drivers for the E&S business, the context behind the 2% favorable reserve development target, and whether the $25 million charge in financial lines was a one-time event. In a follow-up, he questioned the moving parts within the warranty segment and sought an outlook for the Title Insurance business and its associated expense ratio.

Answer

CFO Francis Sodaro detailed the recent share repurchase activity, noting $165 million in Q3 and $385 million remaining on the authorization. Executive Craig Smiddy added that the pace of buybacks is valuation-dependent and the current authorization could be exhausted by year-end or early 2025. Smiddy explained that E&S premium growth is primarily driven by the Old Republic E&S operation. He clarified the 2% favorable development is a long-term goal reflecting a conservative philosophy, not a hard target. Regarding the warranty segment, Smiddy noted that strong growth in auto warranty is offsetting declines in home warranty, which is tied to the slower real estate market. Carolyn Monroe, President and CEO of Title Insurance, stated that while title orders are slowly increasing, a significant market recovery is not expected until late 2025 or 2026, and the expense ratio remains pressured by upfront costs and technology investments.

Greg Peters asked about the company's outlook on growth, specifically if the current mid-single-digit underlying revenue growth guidance might trend lower to low to mid-single digits over the next 24-36 months, considering the challenging P&C pricing environment and macro uncertainties like a potential government shutdown. He also inquired about the strategy for MMA's London Wholesale business, asking if it's primarily for internal opportunities or if it might expand to serve other retailers.

Answer

President and CEO John Doyle clarified that the company's current guidance is for mid-single-digit underlying revenue growth in 2025, acknowledging macro and P&C pricing pressures. He expressed confidence in Marsh McLennan's ability to execute across different economic and P&C cycles, highlighting the potential of the Thrive program for future growth. Regarding MMA's London Wholesale, Mr. Doyle stated the company is not building a third-party wholesale business but leveraging internal specialty talent to reduce outsourcing where unnecessary and to capture revenue synergies from McGriff's business, particularly in bringing U.S.-originated risk to the London market.

Greg Peters followed up on Marsh McLennan's intention to start a wholesale business, specifically MMA London Wholesale, inquiring if it's solely for internal opportunities or if it might expand to work with other retailers and organizations.

Answer

John Doyle, President and CEO of Marsh McLennan, clarified that the company is not looking to build a third-party wholesale business. He explained that they are leveraging their market-leading specialty talent internally to avoid unnecessary outsourcing, while still using third-party wholesalers for specific E&S market access. He confirmed the creation of a new desk in London for MMA, led by Reed Davis and Lizzy Howe, as a revenue synergy for McGriff, aiming to bring in business from third-party wholesalers in 2026.

C. Gregory Peters of Raymond James asked about potential upward pressure on insurance pricing given recent declines and sought more detail on the organic growth drivers in Mercer's Wealth and Career segments, questioning the connection between strong AUM growth and modest revenue growth in Wealth.

Answer

President & CEO John Doyle explained that while most insurance lines are softening, US excess casualty pricing remains under pressure due to the challenging litigation environment. Pat Tomlinson, President & CEO of Mercer, clarified that in the Wealth segment, only the OCIO business revenue is tied to AUM, which grew strongly. He noted that the Career segment's contraction was due to a slowdown in discretionary project work in the US and Canada as clients pause on large transformation projects amid economic uncertainty.

C. Gregory Peters of Raymond James asked about the outlook for insurance pricing, questioning if any upward pressure exists given recent declines, and sought details on the performance of Mercer's Wealth and Career segments, specifically the disconnect between AUM growth and revenue in Wealth.

Answer

President & CEO John Doyle stated that while most insurance markets are softening, U.S. excess casualty pricing continues to face upward pressure due to the litigation environment. Pat Tomlinson, President & CEO of Mercer, clarified that in the Wealth segment, only OCIO revenue is tied to AUM, and recent AUM growth was boosted by acquisitions. He attributed the slowdown in the Career segment to clients pausing discretionary project work in the U.S. amid economic uncertainty.

Greg Peters sought to clarify the accounting for the $450-$500 million in McGriff-related retention incentives and how they would flow through the income statement as adjustments. He also asked about the outlook for restructuring charges in 2025 following the conclusion of the recent program.

Answer

CFO Mark McGivney explained that the $450-$500 million in noteworthy charges over three years will be primarily for retention, a significant portion of which was seller-funded but must be amortized through the company's financials. He clarified that the restructuring program started in 2022 is now closed, and future noteworthy items will predominantly be related to the McGriff integration rather than a new company-wide program.

Greg Peters asked for clarification on HealthEquity's locked interest rates for the upcoming year, specifically if the 4% rate applies to all maturities and both enhanced yield and traditional FDIC products. He also inquired about any nuances in Q2's HSA net new accounts and AUM growth.

Answer

James Lucania, CFO, clarified that the 4% lock on the five-year Treasury applies to basic rates contracts maturing, with most expected to roll into enhanced rates earning a 75 basis point spread. Scott Cutler, President and CEO, stated no specific nuance to Q2 results, noting the company is ahead of expectations given the macro environment and is investing in marketing and improved enrollment for expanded opportunities.

C. Gregory Peters of Raymond James asked if there has been any fallout at the enterprise level due to the elevated fraud incidents and inquired about the retention trends for enterprise customers in that context.

Answer

President and CEO Scott Cutler stated definitively that there has been no client fallout from the fraud situation. He added that enterprise retention rates are actually higher year-to-date, in the high 90s. He emphasized that direct communication about enhanced security measures is being received positively by clients and is helping to build trust.

Sid, on behalf of Greg Peters from Raymond James, asked if the growth in the enhanced rates product is primarily from new HSA assets or if existing members are also reallocating funds into it.

Answer

President and CEO Jon Kessler explained that this year, growth is primarily from new assets, such as those from the BenefitWallet acquisition. He clarified that the next phase of growth to reach the 60% target will involve migrating existing members from maturing basic rate contracts to the enhanced rate option as their default, a process governed by the existing maturity schedule of bank agreements.

C. Gregory Peters of Raymond James inquired about the Skyway Underwriters business, specifically the notable improvement in its quote-to-bind ratio and its target market. He also asked for clarification on the structure of the reinsurance program's second and third event coverage.

Answer

President & CEO Bennett Bradford Martz explained that the company is cautiously optimistic about its admitted apartment business (Skyway), which offers a compelling alternative to the E&S market. He noted the company is being selective and not chasing rates. Martz confirmed this is a property-only book with no liability exposure. Regarding reinsurance, he detailed how the program is designed to handle multiple events, highlighting the role of the Florida Hurricane Catastrophe Fund and a new cascading feature that allows top layers to drop down to fill gaps, enhancing protection for second and third events.

C. Gregory Peters from Raymond James asked about AFG's growth position in inland and ocean marine insurance, the potential impact of tariffs on these lines and the trade credit business, and sought clarity on the M&A commentary from the opening remarks.

Answer

Co-CEO Carl Lindner III clarified that the M&A commentary referred to their M&A insurance business, which is seeing high activity this year, not corporate M&A strategy. Regarding marine lines, he noted growth in Ocean Marine but fewer opportunities in builders risk. He acknowledged tariffs could eventually impact shipping volumes and trade credit premiums but stated they are not seeing a negative effect currently; in fact, the trade credit business is growing.

C. Gregory Peters inquired about the growth positioning for the inland and ocean marine businesses, the potential impact of tariffs on the trade credit business, and sought clarification on the M&A environment mentioned in the opening remarks.

Answer

Co-CEO Carl Lindner III clarified that the M&A commentary referred to their Mergers & Acquisitions insurance business, which is seeing significant activity and profitability this year. Regarding marine lines, he noted a strong ocean marine book but fewer opportunities in builders' risk, and that while tariffs could eventually impact shipping volumes, no significant effect is visible yet. He added that the trade credit business is currently seeing growth due to some market hardening.

C. Gregory Peters asked about AFG's growth position in the inland and ocean marine businesses, the potential impact of tariffs on trade credit, and sought clarification on the M&A environment mentioned in the opening remarks.

Answer

Co-CEO Carl Lindner III stated that while the builders risk side of inland marine has seen fewer opportunities, the ocean marine business has provided growth. He acknowledged tariffs could eventually impact shipping volumes but sees no significant effect yet. Regarding the M&A business (referring to M&A insurance, not corporate acquisitions), he clarified it's a profitable, specialized unit that is seeing a high level of activity this year after a slower 2024.

C. Gregory Peters asked about AFG's positioning for growth in its inland and ocean marine businesses, the potential impact of tariffs, and sought clarification on the M&A environment mentioned in the opening remarks.

Answer

Co-CEO Carl Lindner III explained that while they have a strong Ocean Marine book, builders risk opportunities have been slower due to the economy. He acknowledged potential tariff impacts but noted none are significant yet. He clarified that the M&A commentary referred to their Mergers & Acquisitions insurance business, which is seeing high activity and profitability this year, not corporate M&A strategy.

C. Gregory Peters asked about growth positioning in the inland and ocean marine businesses, the potential impact of tariffs on marine and trade credit lines, and sought clarification on the M&A commentary from the prepared remarks, questioning if it signaled a change in corporate strategy.

Answer

Co-CEO Carl Lindner III clarified that the M&A commentary referred to their M&A insurance business (reps & warranties), which is seeing strong activity, not corporate acquisitions. He noted that while tariffs could eventually impact shipping volumes for the marine and trade credit businesses, they are not seeing a material effect yet and the trade credit business is currently growing due to market hardening.

C. Gregory Peters of Raymond James asked for an explanation of the year-over-year decline in adjusted free cash flow, the financial impact of expiring interest rate caps, and a deeper analysis of the Main Street segment's flat organic growth.

Answer

CFO Brad Hale explained the free cash flow decline was due to the timing of working capital, particularly contingent receipts, which are expected to normalize. He confirmed the expiring interest rate caps have no financial consequence. CEO Trevor Baldwin detailed that Main Street's performance was impacted by a known commission reduction with QBE and unanticipated elevated churn in the Medicare business, but highlighted strong underlying momentum in the builder and mortgage channels.

C. Gregory Peters from Raymond James asked for an explanation of the year-over-year decline in adjusted free cash flow, the financial impact of expiring interest rate caps, and the reasons for the weaker-than-expected organic growth in the Main Street Insurance (MIS) segment.

Answer

CFO Brad Hale clarified that the free cash flow decline was due to the timing of accounts receivable collections, particularly contingent receipts, which are expected to normalize. He confirmed there is no financial consequence from the expiring interest rate caps. CEO Trevor Baldwin explained the MIS segment's flat growth was driven by a planned commission reduction on its builder portfolio and unexpected elevated churn in its Medicare business, but highlighted strong underlying momentum in new embedded partnerships.

C. Gregory Peters of Raymond James asked for details on Hagerty's European expansion strategy, the progress and rollout timeline for the State Farm integration, and the strategic rationale for shifting to a 100% risk retention model with Markel.

Answer

CEO McKeel Hagerty detailed that European expansion is being led by auctions, with a focus on the growing 'young timer' market. He confirmed the State Farm integration is live in 17 states, targeting 25 by year-end, and emphasized the importance of the guaranteed policy rollover volume. Hagerty described the move to 100% risk retention with Markel as a long-planned, mutually beneficial evolution of the partnership that is economically favorable for Hagerty and aligns with Markel's preference for fronting relationships.

C. Gregory Peters of Raymond James inquired about the drivers of higher acquisition costs in the property and casualty segments and asked for perspective on pricing pressure by distribution channel.

Answer

CFO Todd Bryant attributed higher acquisition costs to commission pressure in property and surety, a business mix shift in surety, and investments in technology and people. COO Jen Klobnak added that increased reinsurance purchases also impacted the net expense ratio. Regarding pricing, Klobnak explained that pressure is product-specific, not channel-driven, highlighting increased competition from new entrants in E&S property. She noted that RLI's casualty rate changes are less dramatic than competitors' because RLI starts from a position of profitability.

C. Gregory Peters of Raymond James asked for details on the drivers of higher acquisition costs in the property and casualty segments and inquired about the source of pricing pressure by distribution channel.

Answer

CFO Todd Bryant attributed higher acquisition costs to commission pressure, a business mix shift in surety, and investments in technology and people. He also noted that strong book value growth impacts incentive plans. COO Jen Klobnak added that increased reinsurance purchases also affected the net expense ratio. Regarding pricing, she explained that competition is product-specific, particularly in E&S property from new MGAs and carriers, rather than channel-specific, and that RLI maintains its focus on rate adequacy and risk selection.

C. Gregory Peters of Raymond James inquired about the drivers of higher acquisition costs in the property and casualty segments, pricing pressure sources by distribution channel, and the impact of rate decreases on contingent commissions.

Answer

CFO Todd Bryant attributed higher acquisition costs to commission pressure in property and surety, a business mix shift in surety, and investments in technology and people. He also noted that strong book value growth impacted incentive plans across all segments. COO Jen Klobnak added that increased reinsurance purchases also contributed to the net expense ratio. Regarding pricing, she explained that pressure is product-specific, like in E&S property due to new entrants, rather than channel-specific, and that RLI focuses on rate adequacy and risk selection.

Gregory Peters of Raymond James inquired about the drivers of downward rate pressure in the earthquake market, whether reinsurance costs were declining commensurately, and sought more specific details on opportunities within the inland marine market.

Answer

COO Jenni Klobnak attributed earthquake rate pressure to a long period without major losses, causing insureds to retain more risk and creating a competitive environment. She noted that while RLI's reinsurance costs are slightly lower due to reduced exposure, it's not directly tied to primary rate declines. For inland marine, she cited growth drivers as an expanded local underwriting team, a healthy construction market, and a willingness to underwrite unique risks, which has increased submissions.

Gregory Peters of Raymond James questioned the significant rate increases in personal umbrella, asking if it implied prior pricing was inadequate and if RLI was changing its limit profile. He also asked about limit profile changes in transportation and the methodology behind determining the special dividend.

Answer

COO Jen Klobnak stated that limit profiles for both personal umbrella and transportation remain unchanged, with a primary focus on $1 million limits. President and CEO Craig Kliethermes added that rate increases can reflect market opportunity, not just inadequacy, and noted the challenge of getting timely rate approvals in certain states. Regarding the special dividend, he explained it's based on a Q3 evaluation of capital adequacy against A.M. Best benchmarks, internal metrics, and growth opportunities, not a fixed formula.

Gregory Peters asked for detailed color on the specific sub-segments driving growth in RLI's construction and transportation books, and requested concrete examples of technology investments that are enabling profitable growth.

Answer

COO Jen Klobnak provided a detailed breakdown, explaining their construction portfolio focuses on general contractors in E&S and subcontractors in admitted lines. For transportation, she detailed their focus on trucking, public transport, and specialty commercial auto, plus newer investments in moving and storage. Klobnak then gave examples of technology investments, including streamlining the application process for personal umbrella and contractors, and automating policy issuance in the marine division to free up underwriter time.

Mitch, on behalf of Greg Peters, asked about trends in the competitive environment over the last 12 months and expectations for the rest of the year, as well as any anticipated seasonality in VMM.

Answer

Executive Jayme Mendal identified the primary competitive change as carriers re-entering the market, which increases both monetization and traffic acquisition costs. He highlighted EverQuote's focused P&C strategy and performance-driven flywheel as key differentiators. Executive Joseph Sanborn added that EverQuote's 13% sequential revenue growth was favorable relative to peers. Regarding VMM, Sanborn stated it should remain in the high 20s, with fluctuations reflecting the broader ad environment rather than predictable seasonality.

Gregory Peters asked for technical details on the new bidding technology and agent platform, including integration with existing systems. He also questioned the company's plans for its growing cash balance.

Answer

CEO Jayme Mendal described the new platforms as simplifying tech to improve scale and feature velocity, noting the AI-powered bidding and new agent platform. He clarified that while they integrate with some agency management systems, their platform is primarily for referral delivery, setting the stage for future features. CFO Joseph Sanborn stated that cash is not needed for organic growth and the company is considering M&A to accelerate its P&C-focused strategy, especially given the challenging funding environment for private insurtechs.

Gregory Peters requested more detail on the higher expense ratio in the Specialty P&C segment, asking if the full-year 2024 level is a new normalized run rate. He also asked about any changes in agent relationships and for the latest risk-based capital (RBC) ratio.

Answer

Edward Rand, President and CEO, stated there were no material changes in agent relationships, though consolidation continues to put pressure on commissions. Dana Hendricks, Chief Financial Officer, explained the higher 2024 expense ratio was driven by a significant year-over-year swing in incentive compensation costs, as 2023 achievement was very low. She noted the ratio will likely remain pressured due to the focus on risk selection impacting the earned premium base. The executives did not have the specific RBC ratio on hand but confirmed it had improved year-over-year.

Gregory Peters requested more detail on the higher expense ratio in the Specialty P&C segment, asking if the 2024 level represents a new normalized run rate. He also asked for an update on agent relationships and the company's RBC ratio.

Answer

CFO Dana Hendricks explained that the full-year expense ratio was up due to several factors, most notably a nearly 2-point impact from higher incentive compensation in 2024 compared to very low achievement in 2023. She indicated the ratio will remain pressured as the focus on risk selection impacts earned premium. President and CEO Edward Rand added that there have been no material changes in agent relationships. Management confirmed RBC ratios improved year-over-year but did not have the specific figures available on the call.

Gregory Peters inquired about the competitive landscape for Medical Professional Liability (MPL), changes in attorney representation rates, and the reasons for the divergence between ProAssurance's Workers' Comp results and those of its peers.

Answer

Edward Rand, President and CEO, stated that no new entrants are making a significant impact in the MPL space and that there have been no material changes in attorney involvement. Regarding Workers' Comp, he explained that ProAssurance's shorter-tail book and faster claim closures result in less opportunity for favorable reserve development but also less risk. He suggested ProAssurance may be recognizing and reacting to medical cost inflation faster than its peers.

Greg Peters of Raymond James inquired about the specific market dynamics in California, Florida, and Texas that define the 'hard market' and questioned the decision to retire $450M in debt given the company's growth ambitions.

Answer

CEO Joseph Lacher and President of Kemper Auto Matthew Hunton detailed state-specific conditions, noting reduced supply in California and favorable pricing in Florida and Texas. EVP & CFO Bradley Camden explained the debt retirement is capital-efficient, as it reduces a leverage penalty and is supported by strong liquidity and capitalization, with future earnings also funding growth.