Mark Hughes

Mark Hughes from Truist asked about the collections outlook for 2026, the competitive dynamics and supply-demand in the European market, and the primary contributors to the recent improvements in collections performance. He also inquired about the potential for increasing the tempo of share buybacks.

Answer

President and CEO Martin Sjolund noted strong momentum entering 2026, driven by investments in the US legal channel. EVP and CFO Rakesh Sehgal added that while 2025 saw 13% cash collections growth due to high 2024 buying, 2026 will still see strong growth, with a focus on bottom-line improvement and faster cash EBITDA growth. Sjolund described the European market as stable but competitive, benefiting from PRA Group's diversification and disciplined buying. He attributed collections improvements to multi-year initiatives including the DCA network, legal collections, digital channel growth, and AI leverage. Regarding share buybacks, Sjolund and Sehgal stated that while investing in the business and portfolios is the priority, opportunistic share repurchases are part of the toolkit, with increased capacity due to 2025's net income.

Mark Hughes from Truist asked about PRA Group's collections outlook for 2026, the competitive dynamics and supply-demand environment in Europe, the primary drivers behind recent collection improvements, and the potential for increasing the tempo of share buybacks.

Answer

Martin Sjolund, President and CEO, and Rakesh Sehgal, EVP and CFO, indicated strong momentum for 2026 collections, though not at 2025's 13% growth rate, emphasizing bottom-line growth and faster EBITDA growth than costs. They described the European market as stable but competitive, benefiting from diversification. Sjolund attributed collection improvements to multi-year initiatives including DCA network build-out, legal channel investments, digital growth, offshore resources, and AI. Sehgal noted that share repurchases are part of the capital allocation toolkit, with increased capacity due to 2025's net income, and will be pursued opportunistically.

Mark Hughes from Truist inquired about any tailwinds to collections in Q4 2025 from lower interest rates and the expected effect on 2026 collections if rates continue to decline. He also asked about the company's assumption regarding the change in recoveries expected for 2026.

Answer

Ashish Masih, President and CEO, stated that they cannot isolate small interest rate changes, but the U.S. consumer payment behavior remains stable, with no noticeable impact seen in late 2025 or expected in 2026. He explained that changes in recoveries are calculated quarterly, with 2025's majority being cash overs from 2024/2025 vintages due to operational improvements, which are expected to migrate to portfolio revenue over a few quarters.

Mark Hughes asked about the trajectory of California cumulative trauma (CT) claims, the dynamic of reduced written premium in 2026 amidst a hardening market, the difference in rate increases between California and non-California, the company's view on share buybacks for 2026, and the potential for expense ratio improvement despite a declining top line, specifically referencing AI initiatives.

Answer

CEO Kathy Antonello explained that the acceleration of CT claim frequency has slowed and flattened in 2025, though claims remain elevated. She noted the California market is hardening with significant rate increases, while the countrywide market remains competitive with targeted risk selection. Ms. Antonello confirmed California is driving much of the rate increases. Regarding buybacks, she expects a return to normal levels in 2026, with an opportunistic approach. For the expense ratio, Ms. Antonello expressed optimism for continued improvement due to extensive AI initiatives, including a roadmap, data integration, LLM deployment, AI code assistance, and new tools for claims and premium auditors, which are already delivering measurable results.

Mark Hughes inquired about the trajectory of California cumulative trauma (CT) claims, specifically if the acceleration in frequency has slowed or flattened. He also asked about the dynamic of reduced written premium in 2026 amidst a hardening market, particularly in California, and the company's strategy regarding share buybacks and expense ratio improvement given potential top-line decline.

Answer

CEO Kathy Antonello confirmed that the acceleration of CT claim frequency has slowed and flattened in 2025, though CT claims remain elevated. She noted the California market is hardening, driven by rate increases, but the countrywide environment remains competitive, with Employers exiting certain classes. Antonello stated the company expects share repurchases to return to normal levels in 2026, with an opportunistic approach. She expressed optimism for continued expense ratio improvement due to extensive AI initiatives, including new product development and claims processing enhancements.

Mark Hughes asked about the sequential trend of competitive pressure in commercial earthquake, specifically if it's declining or stabilized, and whether the 50% crop retention is a ceiling or if it could increase further.

Answer

Mac Armstrong (CEO) indicated that commercial quake pricing started softening in Q2 2025 and expects pressure to persist through 2026, especially in the first half, before comps might lead to deceleration. Regarding crop retention, he noted that while retaining more generally leads to more long-term profit, the current strong growth (targeting over 30%) and increased retention could pressure capital, so they will reassess beyond the $500 million premium threshold.

Mark Hughes from Truist asked when the home warranty business is expected to become material enough to be moved out of the corporate segment and into Connected Living. He also inquired about the interest from other partners in the home warranty business, asking for expansion on the categories involved. Additionally, he questioned whether Connected Living's revenue is projected to grow faster or slower than its EBITDA, and sought clarification on whether the mention of reverse logistics with 'other large carriers' referred to new relationships or previously discussed ones.

Answer

President and CEO Keith Demmings stated that the home warranty business is in its early days, and while it will move out of corporate at some point, it's currently led by the Chief Innovation Officer, aiming to replicate the mobile space playbook. He noted strong interest from existing affinity partners and across the real estate ecosystem for home warranty, without revealing specific competitive details. For Connected Living, Keith Demmings reiterated expectations for high single-digit EBITDA growth in Lifestyle, driven by strong contributions from Connected Living and Auto, and significant momentum. He clarified that the reverse logistics opportunity with 'other large carriers' would be with an additional client beyond T-Mobile, with more details potentially shared in May.

Mark Hughes asked when the home warranty business is expected to become material enough to move out of the corporate segment and into Connected Living. He also inquired about interest from other partners in the warranty business, specifically which categories. Additionally, he asked if Connected Living's revenue is projected to grow faster or slower than its EBITDA, and whether the mention of reverse logistics with other large carriers refers to new relationships or previously discussed ones.

Answer

CEO Keith Demmings stated it's early days for the home warranty business, hoping it moves out of corporate sooner rather than later, with more details to be shared after a couple of quarters. He noted that the business is currently led by the Chief Innovation Officer, who previously led Connected Living. Regarding other partners, CEO Keith Demmings mentioned ongoing conversations across real estate and with affinity partners, indicating a long-term place for Assurant in the market. For Connected Living, CEO Keith Demmings projected high single-digit EBITDA growth for the Lifestyle segment, with strong contributions from both Connected Living and Global Automotive, alongside broad revenue growth. On reverse logistics, CEO Keith Demmings clarified that the mention refers to an additional client beyond T-Mobile, with more information likely to be shared in May.

Mark Hughes inquired about the company's new quota share and excess of loss (XOL) reinsurance treaties, specifically if the forward flow coverage through 2028 represents a longer duration than usual and the reasons behind it. He also asked about the pace of share buybacks and capital management plans for 2026, and any expense initiatives or contributions from AI for efficiencies.

Answer

Aurora Swithenbank, CFO, clarified that securing forward flow coverage for three years (through 2028) is consistent with previous actions, noting that the size of the quota share for the third year (2028) was greater and the economics incrementally better, reflecting market strength. Adam Pollitzer, President and CEO, stated that while no set schedule exists, $25 million per quarter is a good assumption for share buybacks in 2026, with flexibility for value opportunities. Ms. Swithenbank discussed Q4 expenses of $31.1 million (20.4% expense ratio), noting seasonal variations but no specific initiatives to alter expense discipline. Mr. Pollitzer detailed the deployment of AI across various departments for increased productivity and efficiency, emphasizing that NMI's already lean structure means AI is not primarily for stripping out expenses but for enhancing team productivity.

Mark Hughes inquired about the lower average size of recoveries in the disability business, asking if it's a past trend, tied to government policy, or other factors.

Answer

Rick McKenney, President and CEO, stated that it's not tied to anything structural or programmatic, but rather fluctuations in the mix of individuals recovering and the size of their claim reserves. He noted that Q4's lower average size was unusual enough to be called out, alongside lower claimant block mortality.