Katie Sakys

Katie Sakys asked for more color on the proportion of new business in specialty operations that came from recurring revenues versus one-time revenues in the quarter, how this dynamic played out, and expectations for its contribution to the mid- to high-single-digit organic growth guide in 2026.

Answer

Carl Hess, CEO, and Lucy Clarke, President of Risk and Broking, clarified that unlike the previous quarter, one-off project work was not a key driver of organic growth in the fourth quarter. They stated that all businesses inherently have a combination of one-off and recurring revenues, and there was nothing particular to highlight regarding this dynamic in the current quarter.

Katie Sakys asked for more color on the new business generated by WTW's specialty operations in the quarter, specifically how much came from recurring revenues versus one-time revenues. She referenced previous discussions about a shift towards more recurring new business contributions in Corporate Risk and Broking (CRB) and inquired how this dynamic played out in the current quarter and its expected continuation in 2026 to support the mid- to high-single-digit organic growth guidance.

Answer

Carl Hess, WTW's Chief Executive Officer, stated that the nature of WTW's work is a combination of recurring and one-off projects, and that one-off project work was not a key driver of organic growth in the fourth quarter. Lucy Clarke, President of Risk and Broking, added that unlike the previous quarter where there was a significant amount to highlight, there was nothing particular to call out regarding the mix of recurring versus one-off revenues in the current quarter.

Katie Sakys of Autonomous Research asked about the growth expectations for the Insurance Consulting and Technology (ICT) business for the rest of the year and the assumptions on client spending. She also followed up on the reinsurance JV guidance change, asking about potential for further revisions.

Answer

CEO Carl Hess and President of Risk & Broking Lucy Clarke addressed ICT, noting a softer consulting environment led to a revised full-year outlook of low-to-mid single-digit growth, though the technology pipeline for the second half remains strong. Regarding the JV, CFO Andrew Krasner stated that based on current information, they do not expect additional changes to the cost guidance at this time.

Katie Sakys asked about The Hartford's growth efforts in Personal Lines for 2026, how they might impact margins in auto and homeowners, and whether retention in the homeowners business has bottomed out with potential for improvement.

Answer

CEO Christopher Swift stated that The Hartford is growth-focused in Personal Lines, expecting auto rate increases to moderate to 6-7% in 2026, which should aid new business and retention. Head of Personal Lines Melinda Thompson confirmed that growth is targeted, particularly in the agency channel, and that auto and home retention are linked. She expressed optimism for an upward trajectory on overall retention, especially as auto rates moderate.

Katie Sakys asked about The Hartford's growth efforts in personal lines for 2026, considering the competitive marketplace and how these efforts might translate to margin profiles for personal auto and homeowners. She also inquired if the bottom of retention in the homeowners business has been seen, with improvement possible in 2026.

Answer

CEO Christopher Swift stated that The Hartford is growth-focused in personal lines, having restored margins. He expects auto rate increases to moderate to 6-7% in 2026, which should aid new business growth and retention. Melinda Thompson, Head of Personal Lines, reiterated that retention and new business are key drivers, and as auto rates moderate, less downward pressure on retention is expected. She confirmed growth in agency and homeowners, emphasizing judicious, smart, and bundled growth. Melinda Thompson also expressed optimism about the upward trajectory of retention overall, linking auto and home dynamics.

Katie Sakys with Autonomous Research asked about the stable 4% organic growth outlook for benefits brokerage and consulting, inquiring what factors are expected to maintain this rate given that health inflation may not provide as much uplift this year as in the past.

Answer

Doug Howell (CFO) explained that while many services are priced per-employee, per-month, rising health costs create more opportunities for advisory projects, such as program changes, deductible adjustments, and pharmacy benefit reviews. J. Patrick Gallagher, Jr. (Chairman and CEO) added that clients are more open to new solutions due to healthcare cost inflation, and Gallagher's creative solutions in areas like telemedicine, along with its distinct benefits practice, are expected to boost their pipeline.

Katie Sakys asked about the factors underpinning the stable 4% organic growth rate for the benefits Brokerage and consulting outlook, especially since health inflation might not provide as much uplift this year as in the past.

Answer

CFO Doug Howell explained that many benefits services are priced on a per-employee, per-month basis, so direct correlation with rate increases is less pronounced than in P&C. However, rising medical costs create more opportunities for advisory projects, such as program changes, deductible adjustments, and pharmacy benefit reviews. Chairman and CEO J. Patrick Gallagher, Jr. added that high healthcare cost inflation makes clients more receptive to Gallagher's marketing efforts and innovative solutions like telemedicine, boosting their consulting operations and pipeline.

Katie Sakys asked about the 200 basis point headwind from the AssuredPartners roll-in on this quarter's brokerage adjusted EBITDA margin and how to project the impact of M&A roll-ins going forward.

Answer

CFO Douglas K. Howell outlined the Q4 outlook, estimating AssuredPartners' seasonality might hurt margin by about 1 point, other roll-in M&A by 40 basis points, and lesser interest income by half a point, while underlying margin expansion is still expected to be 40-60 basis points.

Katie Sakys of Autonomous Research asked for a breakdown of the 7% E&S business growth between open brokerage and MGAs. She also questioned if there was any change in the company's stance on the potential need for divestitures to complete the Assured Partners acquisition.

Answer

CEO J. Patrick Gallagher noted that MGAs were the faster-growing component. CFO Douglas K. Howell added that binding authority business was up near double digits, while open brokerage saw higher submissions but flatter renewal premiums due to the property market. Regarding the Assured Partners deal, Mr. Gallagher gave a definitive "Absolutely not" when asked about the need for remedies or divestitures.

Katie Sakys of Autonomous Research asked for a breakdown of the 7% E&S growth between open brokerage and MGA business. She also inquired if the company anticipated any need for divestitures to secure approval for the Assured Partners acquisition.

Answer

CFO Douglas K. Howell indicated that the binding/MGA business grew near double-digits, while open brokerage saw high submission counts offset by flatter renewal premiums in a property-heavy quarter. CEO J. Patrick Gallagher gave a definitive "Absolutely not" when asked about the potential need for divestitures related to the Assured Partners deal.

Katie Sakys asked about the expected cadence of Brokerage organic growth for the remainder of the year and which quarter held the most potential for upside. She also inquired about the slightly elevated M&A multiple paid for tuck-ins during the quarter.

Answer

CFO Douglas Howell projected that the fourth quarter likely holds the most potential for upside in organic growth, depending on storm season impacts and third-quarter actuarial reserve developments. Regarding the M&A multiple, which was 11.5x, Howell noted it was close to the 10-11x guide and did not see any specific transaction as an outlier.

Katie Sakys of Autonomous Research asked if the expected 2025 brokerage organic growth components (new business, rate, exposure) had changed with the AssuredPartners deal. She also inquired about the outlook for international retail brokerage growth, noting a perceived cooling trend.

Answer

CFO Douglas Howell confirmed the growth components remain unchanged. Regarding international growth, CEO J. Gallagher noted performance varies by geography, with Latin America growing well while Canada slowed. Mr. Howell clarified the perception of a slowdown was likely due to Canada, as U.K. retail and Australia/New Zealand both remained strong with high-single-digit growth, consistent with prior commentary.

Katie Sakys asked how multiples for larger middle-market deals compare to what Gallagher is seeing and whether the company's appetite for larger acquisitions has changed.

Answer

CFO Douglas Howell and Executive J. Gallagher acknowledged larger deals command higher multiples but emphasized Gallagher's unique value proposition for sellers. This includes a fair price, stock participation, and superior resources, allowing them to acquire firms at reasonable multiples (10-12x). Gallagher highlighted the vast market of smaller brokers where their strategy is most effective, implying no major shift in appetite.

Katie Sakys asked about W. R. Berkley's capital return philosophy for the new year, specifically if the Q4 buyback was opportunistic or indicative of continued higher repurchase levels given excess capital.

Answer

Chairman Bill Berkley explained that capital management is a constantly evolving process, and the Q4 buyback was opportunistic. He stated that with the business returning over 20% on capital, buying back stock is a good investment, and the company will continue to look for opportunities to return excess capital, whether through buybacks or special dividends, based on a flexible approach and a more conservative financial leverage ratio.

Katie Sakys asked about the company's philosophy on capital return, specifically whether the Q4 2025 buyback was opportunistic or if higher repurchase levels are anticipated given the continued generation of excess capital.

Answer

Chairman Bill Berkley stated that they constantly evaluate excess capital and opportunities, confirming the Q4 buyback was opportunistic. He expects they will continue to look for buyback opportunities, viewing the business's 20%+ return on capital as a good investment. He also highlighted the company's increased financial conservatism and flexibility in capital management.

Katie Sakys of Autonomous Research asked for color on the exceptional underlying loss ratio in the Reinsurance and Monoline Excess segment and the margin outlook for 2025. She also inquired if the niche growth seen in workers' comp is sustainable and asked for an update on the 2025 catastrophe reinsurance program.

Answer

W. Robert Berkley, Jr. (Executive) explained the reinsurance result reflects a defensive posture in casualty and professional lines while continuing to capitalize on adequate, though pressured, margins in the property market. He believes the growth momentum in specialized workers' comp is sustainable through 2025. For the reinsurance program, he reiterated that the property cat reinsurance renewal was down about 15% on a risk-adjusted basis and deferred further details to a follow-up call.

Katie Sakys asked about the durability of Travelers' strong underlying underwriting results in 2026, given seemingly slowing pricing momentum. She also inquired about the Business Insurance underlying loss results, specifically if there were any similar additions to IBNR for casualty lines this quarter, following last year's practice, and how this relates to net favorable reserve development.

Answer

Alan Schnitzer (Chairman and CEO, Travelers) expressed confidence in the durability of underlying underwriting income, citing Travelers' growth, increased profitability, and investments in products and capabilities. Dan Frey (CFO, Travelers) confirmed that an uncertainty load for casualty lines was included in the accident year loss pick for 2024 and 2025, and will be again in 2026. He noted that casualty losses performed as expected, with Business Insurance workers' compensation driving the favorability.

Katie Sakys asked about the realistic magnitude of client retention improvement next year, building on the 85% figure, and the contribution from service delivery tools. She also inquired if written premium retention is nearing a trough, considering the historical 94% baseline.

Answer

Mark Jones (CFO and COO) expressed encouragement about the client retention trajectory, noting the rate of improvement is faster than the previous decline. He highlighted investments in client-facing tools, automation, and the mobile app as drivers for stickier clients. He stated that premium retention is guided by underwriter pricing, and if average premium increases are around 5% with 85-86% client retention, premium retention should be 90-91%.

Katie Sakys asked about the realistic improvement in client retention off 85% next year and the impact of service delivery tools, and whether written premium retention is at a trough.

Answer

Mark Jones (CFO and COO) expressed encouragement about the client retention trajectory, noting investments in client-facing tools, automation, and the mobile app, expecting continued improvement without giving a specific pace. He explained that premium retention is guided by underwriter pricing, and if average year-over-year premium increases are 5% with 85-86% client retention, then premium retention should be 90-91%.

Katie Sakys of Autonomous Research asked about the drivers for the implied margin expansion in the second half of the year, any changes to the 2026 outlook, and details surrounding the recovery of past-due commissions.

Answer

CFO Mark Jones Jr. clarified that full-year margins ex-contingents might actually be down slightly due to strategic investments in hiring, a new Nashville office, and technology. While not providing 2026 guidance, he affirmed the strategy to expand corporate and franchise teams. The $4 million commission recovery was described as a one-off event with a specific carrier, though engagement with all carrier partners on growth incentives is improving.

Katie Sakys requested color on the geographic extent of pricing stability and new product availability, and asked what specific actions Goosehead is taking to retain clients as market competition and consumer choice increase.

Answer

CFO Mark Jones Jr. and CEO Mark Miller explained that while Texas still sees price increases, new entrants are appearing and rate filings suggest future stability. For retention, Mr. Miller highlighted the strategy of providing the best product at the best price, supplemented by service innovations like the new mobile app, which he views as a key retention tool.

Katie Sakys asked about the time it takes for new hires in the franchise and corporate channels to become margin accretive, and how the company aligns its hiring geographies with returning insurance capacity.

Answer

CFO Mark Jones Jr. explained that franchise producers are almost immediately margin accretive to Goosehead, while corporate agents typically take 6-8 months. CEO Mark Miller confirmed they strategically match hiring with market opportunity, highlighting the new Arizona office as a prime example of placing agents where there is strong product availability and demand.

Katie Sakys inquired if the back-half weighted cadence of margin expansion would repeat in 2025 and sought clarification on the 'different economics' for the new class of corporate recruits.

Answer

CFO Mark Jones Jr. confirmed that a similar back-half weighted margin cadence is typical due to the timing of contingent commission recognition and the seasonality of new business production. CEO Mark Miller clarified his earlier comment, stating the 'different economics' referred to employee retention strategies, not changes to commission structures that would affect financial models. CFO Jones Jr. added that higher productivity from the new class should naturally lead to better margins.

Katie Sakys of Autonomous Research asked about the expected cadence of improvement in member retention and the company's year-end goal. She also inquired about the strategy for the portion of the member book that is priced ahead of target, and the potential impact on ARPU and retention from any price decreases.

Answer

CEO Margi Tooth stated that retention was strong in the quarter and expects the positive trend to continue as the period of significant, compounding rate increases is now behind them. Regarding pricing, she explained that rates are set 12-18 months in advance, so any adjustments for being 'priced ahead' would affect 2026 and beyond. This will likely result in softer increases for members, and potentially some decreases, as the company refines pricing at a granular level to maintain its target 71% value proposition without deviating from it.

Katie Sakys asked for details on the quarter's adverse reserve development, confidence in the loss ratio, the drivers of improved retention, and whether the company would increase investment in competitive online advertising.

Answer

CFO Fawwad Qureshi confirmed a $1.7M adverse development was within a normal range. CEO Margi Tooth stated the retention improvement is a true inflection point driven by focused efforts and a tailwind from members exiting high rate-increase cohorts. On advertising, she reiterated that while they use DTC marketing, they avoid expensive pay-to-play channels that don't meet their disciplined internal rate of return (IRR) guardrails.

Katie Sakys circled back on the timing of growth, asking what changed since the September Investor Day regarding the expectation for a pet enrollment inflection point in early 2025. She also asked if the high 13% ARPU growth is sustainable into next year.

Answer

CEO Margi Tooth clarified that the view hasn't shifted, but emphasized that rebuilding brand momentum and marketing efficacy takes time after a long period of reduced spend. CFO Fawwad Qureshi addressed ARPU, stating that pricing actions will continue to flow through into next year, and he expects ARPU to accelerate in Q4. He anticipates both pricing and pet count will be contributors to 2025 growth.

Katie Sakys of Autonomous Research asked about the 16-month trend time used in the pricing model, inquiring if this timeframe has shifted since the pandemic. She also asked if any states besides Florida have excess profit statutes that could lead to policyholder refunds.

Answer

Bradley Granger, National Automobile Pricing Leader, explained that the 16-month timeframe has not changed significantly, as it is a function of the data look-back period and the company's ability to file rate revisions quickly. Tricia Griffith, CEO, President & Director, stated that she was not aware of any other states with excess profit statutes similar to Florida's.

Katie Sakys questioned why the full-year EBITDA guidance was unchanged despite strong results, asked about the timeline for positive EBITDA in 2026, the potential for a lower long-term loss ratio target, and the status of the homeowners non-renewal program.

Answer

CFO Tim Bixby affirmed the EBITDA breakeven target for before the end of 2026 is unchanged, explaining the path isn't linear due to accelerating growth spend. Co-Founder, Chairman & CEO Daniel Schreiber stated the company prefers to lower prices to drive growth rather than further reducing the loss ratio target. Regarding the non-renewal program, management expects to be past the most significant part by year-end, which should provide a tailwind to both ADR and top-line growth in the future.

Katie Sakys asked why the full-year IFP guidance was not raised after the Q1 beat and what portion of growth is expected from the Car product. She also asked if the 84% retention ratio represents a bottom and about the timing of benefits from non-renewals.

Answer

CFO Timothy Bixby explained that IFP growth is a managed choice to maintain a balanced P&L and stay on track for EBITDA breakeven, so they don't automatically roll forward a Q1 beat. He expects Car to continue growing faster than the rest of the book. Regarding the 84% Annual Dollar Retention (ADR), he expects it could be flat for some time but not deteriorate significantly, highlighting that these profitability efforts already mitigated millions in potential wildfire losses.

Katie Sakys questioned why the 2025 IFP growth guidance is 28% and not the target 30%, given the company's rate adequacy and increased growth spend. She also asked about the risk of missing the current auto insurance shopping cycle by delaying a full-scale launch until 2026. Finally, she requested a breakdown of the $45 million gross loss from the California wildfires.

Answer

President Shai Wininger and CEO Daniel Schreiber responded. Wininger explained that the 28% growth rate is a deliberate choice to balance short-term growth with long-term profitability goals, keeping them on track for 30%+ growth in 2026. Schreiber addressed the car strategy, stating they will win by cross-selling to their large customer base and using superior telematics data, not by competing on ad spend with incumbents. Wininger detailed the wildfire impact: while renters made up 90% of claims by count, homeowners accounted for the majority (roughly 75% or more) of the dollar losses, which were significantly mitigated by reinsurance.

Katie Sakys questioned the impact of recent re-underwriting actions in the homeowners line on the Q3 catastrophe load and the expected effect on the full-year cat load for next year. She also sought more color on the car insurance gross loss ratio improvement, asking about its drivers and the product's cat exposure profile relative to homeowners.

Answer

CFO Timothy Bixby explained that the Q3 impact from re-underwriting was nominal but will grow as non-renewals are processed. He noted that the car product's cat exposure is minimal compared to home, and the primary driver of its loss ratio improvement has been significant rate increases, particularly in California.

Katie Sakys from Autonomous Research asked about the factors that could push organic growth to the high or low end of the 9-11% guidance range. She also requested a response to recent carrier commentary about a 'misalignment of incentives' in the MGA model.

Answer

CFO Janice Hamilton and Founder & Executive Chairman Patrick Ryan expressed confidence in achieving double-digit growth, citing strong performance in casualty and new initiatives that help offset property headwinds. Regarding the MGA model, Patrick Ryan asserted that while misalignment may exist elsewhere, Ryan Specialty is fully aligned with its capital providers, which is why it is a 'destination of choice.' Miles Wuller, CEO of Underwriting Managers, added that the company's investments in talent, infrastructure, and governance ensure underwriting discipline and differentiated results.

Katie Sakys of Autonomous Research noted the reinsurance reserve release was a departure from the typical year-end cadence and asked if quarterly releases could be expected going forward. She also asked for the outlook on the financial lines reinsurance business following its significant growth acceleration.

Answer

Mark Kociancic, Executive VP & Group CFO, confirmed the company's intent to move to a more regular quarterly cadence for reserve development where supported by data. Jim Williamson, President & CEO, explained that the financial lines growth was driven by specific mortgage reinsurance deals. He cautioned that rates in that market are under pressure, so the recent high growth rate should not be considered the normal pace for the future.

Katie Sakys asked for an update on Everest's view of European catastrophe exposures and whether that perspective could be applied globally. She also inquired about how the prior year's reserve charges are performing.

Answer

CEO Jim Williamson specified that the view of heightened risk in European cat was specific to that region, leading to a smaller book there, and does not apply globally. CFO Mark Kociancic confirmed that the reserve charges taken in 2024 are holding well and that management is comfortable with the reserve position three months later, with performance tracking better than the actuarial central estimate.