Hristian Getsov

Hristian Getsov from Wells Fargo inquired about American Financial Group's 2026 business plan, specifically regarding assumed renewal rates compared to Q4 2025 P&C pricing and the inclusion of prior period reserve releases in the 92.5% combined ratio target. Getsov also asked about the significant increase in the casualty underlying loss ratio, seeking clarity on loss pick changes, conservatism, and future run rate implications.

Answer

Brian Hertzman, AFG CFO, clarified that the 92.5% combined ratio target does not specifically identify prior development but noted historical conservatism. He explained that the casualty group's higher accident year loss ratio reflects continued caution in social inflation-exposed businesses and California workers' compensation, aiming for future favorable development.

Hristian Getsov inquired about the 2026 business plan assumptions, specifically regarding expected P&C renewal rates relative to Q4 2025's 5% ex-comp pricing and any prior period reserve releases factored into the 92.5% combined ratio target. Getsov also asked about the significant increase in the casualty underlying loss ratio for the quarter, seeking clarification on whether it reflected changes in loss picks, conservative positioning due to elevated loss trends, or specific events, and if this pick is indicative of future run rates.

Answer

CFO Brian S. Hertzman stated that the combined ratio target doesn't specifically identify prior development but historically shows favorable trends. He noted expectations for less favorable workers' comp development but no reoccurrence of adverse development from casualty lines due to rate and reserving actions, expressing confidence in achieving necessary price increases. Hertzman attributed the higher accident year loss ratio in casualty to continued caution in social inflation-exposed businesses (social services, public entity, excess liability) and California workers' compensation, aiming for a better chance of favorable development in future periods given rate increases.

Hristiyan Getsov asked if Root has observed any meaningful changes in its data or altered its expectations regarding the impact of tariffs, which were a topic of discussion earlier in the year.

Answer

CEO Alex Timm stated that Root has not seen any impact from tariffs in its data yet, and current expectations align with natural trend. He noted an expected seasonal increase in Q4 loss ratios but not due to tariffs.

Hristian Getsov of Wells Fargo questioned how Root is balancing potential tariff impacts and slowing premium growth with favorable frequency trends in its current pricing. He also asked about loss ratio differences between the direct and partnership channels, the contribution of the Carvana partnership, and the timing of when competitive pressures emerged in Q2.

Answer

Co-Founder and CEO Alex Timm stated that Root has not yet seen a material impact from tariffs and is well-positioned to absorb potential costs given its low loss ratios. He confirmed that all channels are priced to the same return targets, so unit economics should not materially differ. While not quantifying the Carvana partnership, he noted no single partner represents a majority of partnership volume. He added that the competitive environment intensified post-April. CFO Megan Binkley projected loss ratios would increase by a couple of points in H2 2025 due to normal seasonality.

Hristian Getsov of Wells Fargo inquired about the specifics of the casualty reserve increases, including the accident years and LPT coverage. He also asked about the impact on underlying loss picks, the size of the Air India loss, property pricing trends, property exposure in the E&S portfolio, any reserve changes related to the Russia/Ukraine aviation verdict, and the reason for the quarter-over-quarter drop in interest expense.

Answer

CEO Pina Albo and CFO Craig Howie addressed the questions. Howie clarified the reserve increase was a manageable $18 million, primarily from discontinued business from 2020 and prior, and was not covered by an LPT. He stated it did not change current loss picks and quantified the Air India loss at $6 million. Albo discussed property pricing, noting pressure on larger accounts but continued attractiveness in reinsurance. Howie confirmed no change in the Russia/Ukraine loss estimate and attributed the lower interest expense to a decline in the SOFR rate and improved credit terms on the company's debt facilities.

Hristian Getsov from Wells Fargo asked about the current M&A environment, specifically regarding valuation multiples, and requested a segment-level breakdown of the updated full-year organic growth guidance.

Answer

CEO Trevor Baldwin described a divergence in M&A pricing, where high-quality, high-growth businesses continue to command top-tier multiples, while average firms are seeing less favorable pricing. He declined to provide segment-level organic growth guidance but reiterated that the headwinds are most pronounced in the Main Street and Insurance Advisory segments, leading to an expected mid-single-digit organic growth for the platform in the second half of the year.

Hristian Getsov of Wells Fargo inquired about the current M&A landscape, including valuation multiples and potential areas of focus, and asked for a segment-level breakdown of the revised full-year organic growth guidance.

Answer

CEO Trevor Baldwin noted a divergence in M&A pricing, where high-quality businesses still command top-tier valuations. He stated that while the company avoids segment-level guidance, the headwinds are most pronounced in the Main Street and IAS segments, leading to an overall expectation of mid-single-digit organic growth for the back half of the year.

Hristian Getsov from Wells Fargo asked about the expected drag on auto PIF growth from New York and New Jersey for the remainder of the year, considering potential retention headwinds from new rate hikes. He also requested an updated view on the impact of tariffs on loss cost trends.

Answer

Tom Wilson, Chairman, President & CEO, declined to provide a specific forecast for New York and New Jersey, instead emphasizing the company's commitment to overall market share growth. On tariffs, he stated that Allstate will manage any impact profitably, noting that the potential effects are already factored into their business operations and are not comparable to the pandemic-era inflation shock.

Hristian Getsov asked for specific retention numbers and whether retention headwinds from rate hikes in New York, California, and New Jersey have subsided. He also inquired about the industry loss assumptions included in the $2 billion California wildfire loss estimate.

Answer

CEO Thomas Wilson and Executive Jesse Merten explained the strategic shift from providing specific retention metrics to releasing monthly policies in force (PIF) data for greater transparency. Executive Mario Rizzo noted that while retention has stabilized in many states, profitability work continues in New York and New Jersey. Regarding the wildfire estimate, Rizzo stated it includes specific company data and an assumption for a fair plan assessment but declined to disclose Allstate's specific industry loss view, offering a sensitivity analysis instead.

Hristian Getsov asked if the year-over-year drop in the Q1 expense ratio was due to one-off items and about the progression towards the sub-11% target. He also questioned if the 68.4% reinsurance underlying loss ratio is a sustainable run rate for 2025.

Answer

CFO Pete Vogt confirmed there were no one-off items affecting the 11.9% G&A expense ratio, attributing the improvement to the 'How We Work' efficiency initiative and noting Q1 is typically the highest expense quarter. Vogt also stated that the Q1 reinsurance underlying loss ratio is a decent proxy for the full-year run rate and was not impacted by any significant aviation losses.

Hristian Getsov asked about the expected impact of new business initiatives on premium growth in 2025. He also inquired about the planned use of capital freed up by the LPT and the potential impact of the California wildfires on future property pricing.

Answer

President and CEO Vincent Tizzio expressed confidence in sustained mid-to-high single-digit growth in 2025, driven by foundational investments and new product capabilities. CFO Pete Vogt reiterated the capital use strategy from Investor Day, including investing in the business and opportunistic share repurchases. Tizzio commented that it was too early to determine the wildfire's impact on future pricing.

Hristian Getsov asked about the potential impact of new tariffs on margins and how Progressive is balancing its aggressive growth strategy with this potential loss cost headwind. He also followed up on the expected seasonality of ad spend.

Answer

CEO Susan Griffith confirmed that Progressive's teams are actively modeling the potential impacts of various tariffs on parts, oil, and lumber. She noted the company is well-positioned with current margins below its 96% target, providing a buffer to react to these changes, which she expects to materialize more in the second half of 2025 and into 2026. On ad spend, she reiterated that spending will remain flexible and responsive to market conditions rather than following a fixed seasonal budget.